Which cloud accounting app is better – Xero or QuickBooks? It’s a question we get asked a lot and whilst both apps offer similar features and are recognised by HMRC when it comes to Making Tax Digital, there are some crucial differences between the two.
In this article, we’ll be looking at the main features and helping you to make a decision on which will work better for you and your business.
As both options offer payroll, invoicing, transactions, bank feeds and reconciling as well as many more advanced features, deciding which one to choose isn’t a simple task. Here are our thoughts on Xero and QuickBooks to help you make the right choice.
The main areas that this article will cover are:
QuickBooks versus Xero
QuickBooks was first to market and has allowed them to build some advantages, most notably offering more APIs and syncing with more banks for the reconciliation functionality.
Xero offers a similar cloud-based software experience aimed at small business owners and their accountants with a range of easy-to-use, time-saving tools. Xero allows you to track cash-flow and payments and invoices and has fantastic customer support on hand via email and phone support to help you 24/7.
Starting with the most basic function and the one that the biggest hurdle for many businesses is invoicing. Both Xero and QuickBooks are very capable, allowing you to create smart, professional invoices without complication.
With both apps, you simply need to add the contact for the business you are invoicing, add the costs and the name of the service or product they are being billed for and you are ready to send. Both offer online payment options; Xero offers Stripe and PayPal, and QuickBooks offers PayPal and GoCardless. Xero also has a reminder function, alerting you when you haven’t been paid or even sending an automated email to the client giving them a gentle nudge that the payment is due, allowing you to focus on the important things.
Both tools offer the ability to track expenses and store receipts by taking a picture from the mobile app, storing it securely in the cloud, ready for the end of the tax year. This allows you to go paper-free, store information securely and stay on top of your expenses with ease. Not only does this help you keep track of what your business is spending but both tools have a portal for your accountant to view what is happening.
QuickBooks allows you to sort expenses automatically with the software organising your receipts into the relevant tax categories so it’s easier to claim expenses back. That means much less work at tax time and less time wasted sorting every payment manually.
This feature is extremely useful for businesses with a higher volume of expenses and incoming cash, by automating the process a lot of time can be saved. The only issue here is that not every bank is supported. For example, if you have a less well-known bank or use a startup banking company like Coconut or Tide you’ll be out of luck if you use QuickBooks.
Recently, however, Tide and Xero have created an API, so it probably won’t be long until QuickBooks catches up. Depending on who you bank with effects which tool you would favour, so it’s vital you check this before getting started. QuickBooks has a slight edge here as they offer more connections to banks.
In terms of cost, QuickBooks definitely comes in cheaper. They typically run campaigns with 6 months at a discounted rate and still come in slightly cheaper after that. Prices vary depending on the size of your business and what you do. If you are a freelancer just needing to track expenses and send a handful of invoices each month QuickBooks can be had for £6 a month (less if you get one of their introductory offers).
For an all-singing, all-dancing option the price goes up to £25 per month. Xero starts at £10 a month for a basic account with the ability to send 5 invoices and 5 bills and limited bank transactions. The cost rises to £27.50 per month for more advanced features and fewer limitations on bills and invoices.
Xero charges extra for their project management functionality that tracks time and progress and they also charge more for payroll. QuickBooks charges £1 for each user that goes through the payroll manager. Xero charges £5 for 1 user and £1 for every additional user. For this reason, QuickBooks edges it again.
On the whole, both options are fairly easy to use. Of course, it depends on what you are used to and what you need for your business.
Overall both apps are evenly matched. As is often the case with software apps, when one adds a new feature the other is not too far behind in offering something similar. Users that are looking for the more advanced features there could be a benefit to choosing one over the other. In those situations, TBL is available to advise which may be the best fit for you.
Of course, there are many other options on the market too, including Sage, Zoho Books and Freshbooks. They are not as widely recognised as Xero and QuickBooks but do offer a lot of the same functionality.
If you need some help managing your cloud accounting software and staying on top of your books in line with your Making Tax Digital deadlines, then get in touch with the TBL Accountants team.
TBL Accountants are your local accountancy firm operating in Southend and across Essex. We specialise in a variety of services as personal, business, and charity accountants. Want to find out more? Get in touch with our team today.
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