Xero vs QuickBooks is a topic that has elicited a lot of discussion and debate in the small business community. Both QuickBooks and Xero are excellent Shopify accounting software solutions, but which one is the best for your online business?
Xero and QuickBooks are accounting software programs that allow users to manage their finances from anywhere. They both offer a wide range of features and benefits, but there are significant differences between the two programs.
In this article, we will look at each accounting software in detail and compare them head-to-head. We will analyze the features, benefits, pricing, and ease of use to help you decide which program is right for you.
Xero is cloud-based accounting software that is designed for small businesses. It has various features, including invoicing, expenses tracking, and bank reconciliation.
Xero also integrates with several other apps. Xero integration with Shopify and other platforms brings the convenience and flexibility every entrepreneur needs to manage an online business.
This software is a good choice for businesses looking for a comprehensive accounting solution. Xero is also easy to use, making it a good option for small businesses new to accounting.
QuickBooks is another popular accounting software. It offers many of the same features as Xero and also integrates with Shopify and other platforms.
QuickBooks is one of the most versatile, full-featured, and user-friendly accounting software made for small business owners. It has four distinct small business plans and one plan for self-employed freelancers. This makes it a scalable option. As your business grows, QuickBooks is there to grow with you.
Xero vs QuickBooks: Where QuickBooks Wins
A few key differences come to mind when we talk about Xero vs QuickBooks where QuickBooks takes the lead. They include:
Transaction Tracking Tags
Both Xero and QuickBooks have their ways of tagging transactions for tracking and analysis. Xero offers two tracking categories: "Business" and "Taxes." Transactions can be tagged as business or personal, and this distinction is vital for tracking expenses and profit/loss ratios.
On the other hand, QuickBooks uses a system of five tags: income, expense, asset, liability, and equity. It allows users in the Simple Start, Essentials, and Plus plans to create up to 40 tags, which can help track specific types of transactions.
Users in the Advanced plan can create unlimited tag groups. This ensures that you can track your business finances as precisely as possible.
For instance, if you're a merchant who sells products on Shopify, you might want to create a tag for "Shopify" transactions. This would help you keep track of your profits and losses from both sources separately.
Mileage And Time Tracking
QuickBooks and Xero offer mileage and time tracking features. This can be helpful for small business owners who need to track their time and expenses.
Xero allows for time mileage and time tracking in its highest-tier Established plan. This means that only users in this plan can track how many hours they worked on a project and their hourly rate.
On the other hand, QuickBooks offers this feature in all of its plans. This makes QuickBooks a more affordable option for business owners who need to track their time.
Both Xero and QuickBooks offer excellent customer support, with phone, chat, and email options. However, QuickBooks offers more support channels than Xero (including a dedicated phone line for small businesses), which could be an important factor when choosing software.
Additionally, QuickBooks' customer service is generally better than Xero's.
However, Xero does offer a few features that QuickBooks doesn't (such as the ability to export data in Excel format), so it's essential to consider all of the features offered by both programs before making a decision.
Good accounting software will allow you to claim your expenses easily. Xero and QuickBooks are both great options in this category. They both have features that make it easy for you to keep track of your business spending and file for tax deductions.
However, Xero only allows claiming expenses at its highest level of subscription. In contrast, QuickBooks offers this feature at all of its subscription levels. If you are looking for a comprehensive accounting solution that will allow you to claim your expenses easily, then QuickBooks is the better option.
Number Of Invoices
We cannot talk about Xero vs QuickBooks without mentioning the number of invoices each can create.
On Xero's Early plan, you can only send 20 invoices per year. As your business grows, you’ll quickly need to upgrade your plan.
QuickBooks allows unlimited invoices on all of their plans, which is great news if you send out many invoices. This could be a deciding factor if you are trying to choose between the two programs.
QuickBooks Online boasts over 5.3 million users. While you combine this with the number of QuickBooks desktop users, the number shoots to over 8 million. This makes it one of the most popular accounting software. In comparison, Xero has only about three million users.
Xero is not as ubiquitous as QuickBooks, but it is slowly gaining popularity. It is especially popular among small businesses and startups.
Xero vs QuickBooks: Where Xero Wins
Now, let’s explore the features in which Xero does better than QuickBooks.
If you own a big business, you need accounting software that more than one person can use. The highest QuickBooks plan, the Advanced plan, has a maximum of 25 users and costs $185 per month.
On the other hand, Xero has an unlimited number of users for its Established plan, which costs $65 per month. This is great for growing businesses and needs to add more users to their accounts.
Inventory management is an essential part of any business. Whether you're a small business or a large corporation, you need to keep track of your inventory if you want to stay in business. The two most popular options for inventory management are Xero and QuickBooks.
However, you need to pay for the QuickBooks Online Plus plan to enjoy inventory management features. On the other hand, Xero offers inventory management as part of every plan. This means that with Xero, you can easily keep track of your inventory and make sure that you never run out of stock.
Fixed Asset Management
Fixed asset management is one of the key features of Xero. This allows businesses to keep track of all their assets and how much they are worth. If you are a Shopify merchant, then this is a feature you will want to use.
QuickBooks also has a feature that allows businesses to keep track of their assets, but it is not automatic. You have to enter the information into the software manually. This can be a bit of a hassle, so if you want an easy way to keep track of your assets, then Xero is definitely the better option.
Xero vs QuickBooks: Where They Tie
Both Xero and QuickBooks are different in many aspects, but they do share a few similarities, as shown below:
Ease of Use
When choosing between Xero vs QuickBooks, one of the main factors you'll look at is the ease of use.
The dashboard in each software is easy to understand and use, with all of your financial data available at a glance. They are made for users who want to take care of their finances without learning complex accounting software.
These two programs are also great for business owners who need to collaborate with their accountants. Their shared files feature makes it easy for you to keep track of your business's finances. Also, the accountant can easily import your data into their software for further analysis.
Another area where Xero and QuickBooks tie is bank reconciliation. This process can be a little daunting for first-time users, but both software makes it easy to match your transactions with the statements from your bank.
In addition, both programs have features that will help you identify potential discrepancies in your records. For example, they can show you how much money you have in different currencies and how your profits have changed.
However, both reconciliation features fall short when it comes to accurately recording each sale, refund, and transaction fee. Luckily, you can use Reconcile.ly to help streamline the reconciliation process with these two accounting solutions.
Our powerful tool is built to make your life easier. It creates invoices for every transaction in your accounting software so that you can easily see how everything adds up and get a complete view of your finances.
Compatibility With Reconcile.ly
Reconcile.ly is an app designed for Shopify store owners. It's perfect for users who want to keep their books in good order but don't have the time or inclination to learn complex software.
Reconcile.ly automatically sends Shopify payments, refunds, and fees into the right accounts in your Xero or QuickBooks software. This means that you can keep track of your Shopify income and expenses without doing any extra work or having to manually reconcile individual orders.
Which One To Use
Ultimately, whether to use Xero or QuickBooks comes down to personal preference. Both programs are great for Shopify merchants, and they offer many features that can help you keep track of your finances.
There are several factors you should consider when making your decision. They include:
Level Of Detail You Need In Financial Reports
When we talk about Xero vs QuickBooks, the level of detail you need is a big consideration. QuickBooks offers more detailed reports than Xero if you want to drill down into your data.
For example, if you want to see a breakdown of how much money you've made from each product or service, QuickBooks can give you that information. If all you need is a high-level overview of your business's finances, Xero will be more than sufficient.
However, you can use Reconcile.ly with either accounting software solution to bring in an extra level of detail. Our tool allows you to create invoices for every single sale, refund, and fee so that you get a comprehensive view of all the money coming in and going out of your Shopify store.
Ease of Use for Collaboration
The next thing to consider is how easy it is to collaborate with others.
Xero and Quickbooks are both great for this, but there are some differences. For example, the shared files feature in Quickbooks is a little more user-friendly than the one in Xero. However, this doesn't mean that Xero is difficult to use for collaboration - it's just not quite as straightforward as Quickbooks.
You need to look at the level of knowledge, or that of the person you want to collaborate with when deciding which software is best for you. Don't go for one that is too complex as it will be hard to get someone up to speed if they're not already familiar with accounting software.
The price is another important consideration. QuickBooks is a little more expensive than Xero, but it does offer more features. The higher the package you choose in each software, the more features you'll get.
Xero has three pricing plans as outlined below:
- Early: This starter plan costs $22 a month. It is specially made for sole traders, and it gives you access to basic accounting features like invoicing, bank reconciliation, and expense claims.
- Standard: This plan costs $35 a month. This is ideal for small businesses as it includes additional features such as multi-currency support and project tracking.
- Premium: This one costs $47 a month and gives all the features of the two plans above and much more.
QuickBooks offers five plans:
- Self-employed (for freelancers): At just 7$ per month, freelancers can track their income and expenses, organize receipts, run basic reports, and estimate taxes.
- Simple Start: This plan is free for the first month and then $12 per month. It's good for very small businesses that just need to track income and expenses.
- Essentials: This plan costs $25 per month. It's good for businesses that need to track inventory, create purchase orders, and handle payroll.
- Plus: This plan costs $40 per month. It's good for businesses that need to track time, create estimates and invoices, and manage projects.
- Advanced: This is the best plan for established businesses. It has all the features present in other plans, plus advanced features such as batch invoices and expenses, exclusive app integrations, on-demand online training, and more. It costs $90/month.
Your business is the single most important consideration for choosing between Xero and QuickBooks.
Both programs are great for small businesses, but they offer different features. It's important to consider what you need from your accounting software and choose the program that best meets those needs.
Some of the needs you may want to consider include:
Features that Are Important to You
Both platforms have a wide range of features, but not all of them are important to every business. You'll need to decide which features you can't live without and then choose the platform.
The Level of Support You Need
When you're starting a business, it's crucial to have access to good support. Xero and QuickBooks both offer different levels of support, so you'll need to decide which one is right for you.
The Number of People Using it
Look at the number of people who will need to use the software and decide which platform can accommodate them.
The Skill Level of the Person Running Your Accounts
Are you running your accounts, or do you have someone else doing it for you? If you're doing it yourself, you'll need to choose a platform that is easy to use. If you're relying on someone more experienced, you may want to choose a platform that offers more complex features.
Xero vs QuickBooks: Which Is Right For You?
There is no simple answer as to which software is right for you when it comes to choosing the better option. Both Xero and QuickBooks have pros and cons, and the best decision depends on your individual needs.
Make sure to consider the factors listed above, and then choose the best-suited platform for your business.
Regardless of the software you choose to use, don't forget that Reconcile.ly can help you keep track of your expenses and reconcile your accounts. Automating this process will save you time and help to ensure accuracy in your records.
Check out our free trial today to see how Reconcile.ly can help you streamline your Shopify accounting and enhance your business.