Every business needs a good system for its accounts, from the smallest startup to the biggest multinational − not to mention freelancers. But small business accounting can be particularly trying, as smaller operations generally aren’t able to develop bespoke in-house business accounting methods.
That’s where online accounting software comes into its own. These days there are a range of cloud-based accounting options to choose from, any one of which might be perfect for your business. But how to choose between them?
This article will look at 2 of the leading contenders: Xero and QuickBooks. There are multiple versions of QuickBooks: this article will be looking at QuickBooks Online for the UK. Read on to find out more, or jump forward to see how both providers compare:
Both providers aim to make tracking real-time payments effortless, but you should also consider providers that can help you receive international payments as your business grows. TransferWise, for example, can help you with making and receiving international payments. More on that in a moment.
We’ll cover pricing later on, but first of all it’s worth noting that both Xero¹ and QuickBooks² offer 30 days for free as a trial, so it’s straightforward to have a play around in both platforms before committing.
Signing up is straightforward with both Xero and QuickBooks. Both need basic details from you like name, phone number and email; at the signup stage Xero is a little more thorough, requiring some very basic details about your business and needing you to confirm your identity via email.³
Both products score high for user-friendliness. Xero’s Dashboard⁴ puts all the key info on the same page and lets you customise it, while QuickBooks also offers a clean and intuitive homepage⁵. For rookies, though, Xero has the edge. As well as setting up your own business account⁶, you can take a look around the accounts of a “demo company”⁷, to get a more detailed feeling for how it’ll work when it’s all up and running. There are also some handy explainer videos that pop up.
Doing business overseas and need to make international business payments? TransferWise could save you money versus your bank.
When you have to pay employees or suppliers overseas it might seem logical to do this with your bank. You already have an account there, they have all your information, so it just seems easier. Although these are valid reasons, easier certainly doesn’t mean cheaper.
Most banks won’t convert your money with the mid-market exchange rate when you make an international payment. Instead they add a mark-up and charge you a hidden fee that way. TransferWise is different. Its smart technology skips hefty international transfer fees by connecting local bank accounts all around the world. Which means you can save up to 8x by using TransferWise rather than your bank when you send your money abroad.
TransferWise also has a lot of additional features for business users. You can connect with Xero to make your life easier, upload a batch of payments in one go or even automate your payments by integrating with our API. And there’s more to come in the future.
Both Xero’s accounting software and QuickBooks offer a tiered subscription model of pricing, with different levels available depending on how much your business will use the service and how many features you need. An overview is below.
As you’ll see, both of them offer discounted rates. You can get a cheaper rate with Xero for the first 4 months, and with QuickBooks for the first 6. Watch out, because you might find yourself ineligible for the cheaper rates if you initially opt for the 30-day free trial.
NOTE: Xero is increasing its prices in August 2019. From then on, the Standard plan will be £24 per month and the Premium plan £30.⁸
|Self-employed||N/A||Name: Self-EmployedAmount per month: £3 (£8 after first 6 months)Details: This package strips out features like VAT filing and CIS transactions.|
|Basic||Name: StarterAmount per month: £5 (£10 after first 4 months)Details: Limits the number of invoices, quotes, bills and bank reconciliations you can make.||Name: Simple StartAmount per month: £5 (£12 after first 6 months)Details: No limit on number of invoices. Free UK phone support.|
|Middle||Name: StandardAmount per month: £11 (£22 after first 4 months)Details: No limit on number of invoices, quotes, bills and bank reconciliations you can make.||Name: EssentialsAmount per month: £7 (£18 after first 6 months)Details: Up to 3 user profiles.Multi-currency support.Ability to manage bills and payments.Ability to track employee time.|
|Upper||Name: PremiumAmount per month: £13.75 (27.50 after first 4 months)Details: Handle multiple currencies.||Name: PlusAmount per month: £11 (£27 after first 6 months)Details: Up to 5 user profiles.Budgets and purchase orders.Stock management.Project profitability tracking|
There are also some extras that the two platforms offer: the prices for which differ by provider.
|Payroll||3 months free, then £5 per month For up to 5 payroll employees. £1 for each additional employee||£1 per employee, per month¹¹ Included at all levels except Self-Employed.|
|Projects||£5 for each additional user||N/A|
|Expenses||£2.50 for each user||No extra cost. Included with all levels of package.|
|CIS (Constuction Industry Scheme)||Free until end March 2020, then £5 per month This lets you submit CIS (construction industry scheme) returns from Xero.||No extra cost. Included with all levels of package.|
As you can see from the table, while both platforms offer similar-looking tiers, there are some fundamental differences, including:
- Only QuickBooks offers a special package for self-employed people who may not need some small business accountancy features.
- QuickBooks’s tiers increase the number of user profiles you can connect. With Xero, there’s no limit on the number of users you can invite, at any level.
- By contrast, Xero’s basic level limits the amount you can use it each month, cutting you off after 5 each of invoices, quotes and bills, and 20 reconciled bank transactions. QuickBooks doesn’t limit these functions at any level.
- Multi-currency support kicks in at the upper level on Xero but the medium level on QuickBooks.
- On QuickBooks you only get the ability to manage bills and payments from the medium level up.
There are plenty more differences too: in fact, the tiers are quite differently configured. You’ll need to take a close look at what each one offers and weigh them up against your business’s needs.
One of the most important questions about accountancy software concerns integration with your bank, yet it’s easy to overlook this on the assumption that it’ll be fine. This is a topic on which it pays to do the research.
It’s possible to connect to a wide variety of bank accounts with both Xero and QuickBooks. However, setting up a direct bank feed is something slightly different: with a direct feed, your accountancy software and your bank communicate directly each working day, making sure your transaction record is always up to date.
Xero offers free direct bank feeds with 18 UK business accounts, including TransferWise: you can connect your Xero and TransferWise accounts easily. With some of these direct bank feeds, there’s a monthly fee of up to £3 + VAT that is passed on to you.¹⁴ Contrastingly, QuickBooks bears the cost of direct bank feeds, but currently offers them with business accounts at just 4 UK banks.¹⁵
So before signing up, do make sure your account will communicate effectively with your accountancy software.
What about the key features offered by both platforms: how do they compare? Here’s a look at a few of the important issues.
Both platforms offer a basic default layout for invoices which will do the job adequately. They also both offer the ability to customize the layout by using your own invoice template which you can design in Microsoft Word: a great option if you’d rather have a more individual feel to your invoices. People on QuickBooks’s self-employed plan may have fewer options.
Either platform should allow you to account for the full complexity of invoicing, with the ability to account for VAT, declare tax codes, and so on.
As noted in the table above, Xero and QuickBooks have very different approaches here. Xero doesn’t limit the number of users who can sign up, while QuickBooks increases the number of users as part of its tiered pricing.
Which option is right for you will depend on how many people you need accessing your accounts. If you’ll need several users, this may prove one of the most compelling reasons to choose a higher tier with QuickBooks − although the unlimited users offered on Xero may also tempt you in that direction.
As far as bills go, the middle tier of both platforms may be what you need. You only get to enter 5 bills per month on Xero’s Starter level, while you can only manage bills and payments at all from the Essentials level with QuickBooks.
On the other hand, simply keeping track of your income and expenses is possible with both, and if you make sure that due dates are entered then both will help you keep up with payments in and out of your business.
Payroll is yet another tough issue for small businesses, yet nothing is more important than making sure your staff are paid on time. Xero Payroll is an add-on service that lets you manage this aspect of your business − including pensions − from the same place you do your accounts.¹⁸
QuickBooks doesn’t technically offer a “payroll service”: you’ll still be in charge of the process. It does, however, facilitate that process for you with numerous helpful tools.¹¹ Just like Xero, it offers help with pensions, payslips, and HMRC. An “Advanced Payroll” feature is currently in beta testing, which adds an array of handy additional options.¹⁸
The pricing is similar on both platforms. For Standard Payroll, QuickBooks charges £1 per employee per month. Xero charges £5 per month for up to 5 employees, and then £1 per extra employee; you can get the first 3 months free.
So: Xero vs QuickBooks Online. They may offer similar sorts of platform, but the more time you spend with them, the more different they start to seem. The subscription models for both work in quite different ways, which suggests a different sort of emphasis. Xero lets multiple people use the account while QuickBooks strictly regulates this; on the other hand, QuickBooks doesn’t limit the number of invoices and so on that you can make, even at its basic level.
Other differences include the emphasis that QuickBooks places on “Miles”, making it easier for you to record the distance you travel for work: useful when it comes to expenses. Xero’s more thorough integration of payroll services is a point in its favour for those managing a team, and its greater number of direct bank feeds could be useful as well.
The two providers differ when it comes to multi-currency support, which is included at QuickBooks’s middle level but Xero’s upper level. However, one point in Xero’s favour here is its integration with TransferWise: a TransferWise borderless account gives you virtual bank details in multiple currencies, so that you don’t have to worry about costly conversion fees or bad exchange rates.
Overall, it’ll be down to the precise needs of your business − and, of course, which one of them feels right to you. Every business is unique: so take the time to research which accounting software works for you.
- Check out Xero’s support area to either ask a specific question or search for a topic.
- Access QuickBook’s support area for help articles and a Q&A.
- Existing QuickBooks customers can also telephone the support centre, except for those customers on the Self-Employed plan.
- For more about TransferWise’s Xero integration you can contact email@example.com or +44 (0) 203 8087 139.
1.https://www.xero.com/uk/signup/ Xero Sign-Up
2.https://quickbooks.intuit.com/uk/ QuickBooks Pricing
3.https://central.xero.com/s/article/Add-another-organisation-to-Xero?userregion=true Xero: Add an Organisation
4.https://www.xero.com/uk/features-and-tools/accounting-software/dashboard/ Xero Dashboard
5.https://quickbooks.intuit.com/uk/accounting-reports/ QuickBooks Dashboard
6.https://www.xero.com/uk/features-and-tools/accounting-software/business-performance/ Xero Business Dashboard
7.https://central.xero.com/s/article/Use-the-demo-company#Web Xero: Create a Demo Company
8.https://www.xero.com/uk/pricing/change-info/ Xero Pricing Change
9.https://www.xero.com/uk/pricing/ Xero Pricing
10.https://quickbooks.intuit.com/uk/pricing/ QuickBooks Pricing
11.https://quickbooks.intuit.com/uk/payroll/ QuickBooks Payroll
12.https://quickbooks.intuit.com/uk/business-expenses/ QuickBooks Expenses
13.https://quickbooks.intuit.com/uk/cis/ QuickBooks CIS
14.https://www.xero.com/uk/partner-programs/banking-partners/uk-banks/ Xero Bank Feed Integration
15.https://quickbooks.intuit.com/community/Banking/QuickBooks-Direct-Feeds-Frequently-Asked-Questions-FAQ/m-p/239562 QuickBooks Bank Feed Integration
16.https://www.xero.com/uk/features-and-tools/accounting-software/invoicing/ Xero Invoicing
17.https://quickbooks.intuit.com/community/Manage-Customers-and-Income/Uploading-invoice-template-to-QuickBooks/td-p/239410 QuickBooks Invoicing
18.https://www.xero.com/uk/features-and-tools/accounting-software/payroll/ Xero Payroll
All sources checked 27 June 2019.
This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.
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