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As two of QuickBooks Online’s biggest competitors in the small-business accounting software space, Xero and FreshBooks each have their own strengths. When you compare them head-to-head though, Xero pulls through as the more scalable, easy-to-use solution for small businesses looking to grow their operations. It includes stronger accounting features across all its plans, as well as unlimited users, inventory management and access to over 1,000 third-party integrations.
FreshBooks’ unlimited time tracking feature and invoicing capabilities are better-suited for freelancers, independent contractors and other self-employed professionals.
FreshBooks vs. Xero at a glance
Has a strong invoicing feature; app lets users send invoices on the go, scan receipts and track mileage; basic inventory tracking for billable items; least expensive plan lacks double-entry accounting reports.
Has robust reporting tools and report customization options, basic inventory tracking in all plans and a capable mobile app; Early plan limits the number of invoices and bills.
Ease of use
Auto-categorizes transactions for you, but you can’t set up your own bank rules; no global search function; least expensive plan lacks bank reconciliation tools.
Includes tools that help automate the reconciliation process, along with a global search function; has a simple layout and a customizable dashboard.
Can support freelancers, contractors and small businesses with a handful of employees; highest-tier plan includes two users (additional users can be added for a fee).
Can support larger small businesses with dozens of employees; all three plans include an unlimited number of users.
Ease of sharing with accountants
Least expensive plan doesn’t allow accountant access; lacks complete audit trail.
Includes audit trails and easy accountant access; although the product is gaining popularity in the U.S., it’s less popular than some competitors like QuickBooks.
Integrates with more than 100 third-party apps; limited choices for direct payroll and point-of-sale integrations.
Integrates with more than 1,000 apps.
Includes phone support in all plans 8 a.m. to 8 p.m. ET from Monday to Friday; offers email support, but not live chat support with a human.
Does not provide a phone number to customers but a representative will call you if necessary; no live chat support.
Plans start at $17 per month.
Plans are affordable, starting at $13 per month, but no free plan.
Project tracking tools in higher-tier plans; lacks industry-specific reports and transaction tracking tags; users with multiple businesses must pay for separate subscriptions.
Includes project tracking tools in most expensive plan; limited transaction tracking tags; lacks industry-specific reports; users with multiple businesses must pay for separate subscriptions.
Why Xero wins
Ease of use
With Xero, all plans include a bank reconciliation tool that suggests transaction matches for you, making it easy to reconcile bank accounts. Bank rules help automate the process, too. If a bank statement line meets the set of criteria you specified, Xero will suggest creating a matching transaction for you. After you approve the match, the transaction is created. Additionally, Xero’s customizable dashboard and global search function make the software easy to navigate.
FreshBooks doesn't offer bank reconciliation with its least expensive option, FreshBooks Lite. And while the software automatically suggests some transaction matches for you during the reconciliation process, you cannot create your own custom bank rules.
If you want to add multiple users to your accounting software, Xero is likely a better choice than FreshBooks because it accommodates unlimited users in all plans. You can add new users via email and assign them one of seven different user roles, including “read only” and “advisor” access. If you want to further customize a user profile, you can give users additional permissions to particular features, like reports, projects and new expenses.
All FreshBooks plans, except for the highest-tier custom plan, come with one user. Additional team members cost $10 each per month. FreshBooks gives you six user roles to choose from, plus client access and project manager customization options.
Number of users aside, Xero is a better fit for small businesses with multiple employees, whereas FreshBooks is more ideal for freelancers and independent contractors.
Ease of sharing with accountants
All Xero plans come with accountant access, but FreshBooks’ least expensive option does not. Working with an accountant is beneficial, regardless of your business’s size, because they can help ensure you’re interpreting your financial data correctly and provide assistance come tax season. In the same vein, FreshBooks does not provide audit trails for accountants. Audit trails show all changes within the software, who made them and when they were made to help accountants track down errors or unauthorized entries.
Both FreshBooks and Xero allow you to track business performance using your dashboard, and generate and download financial reports. But Xero’s reporting is more robust thanks to its detailed accounting features.
Xero offers more than 80 reports, including standard financial reports, and lets you add tracking categories to monitor performance in different areas of your business. In comparison, FreshBooks offers fairly basic reporting tools. You can generate traditional financial reports, but they aren't available with all plans. You’ll need the Plus plan to access a general ledger, trial balance or chart of accounts and the Premium plan to create any accounts payable reports.
Xero offers accounts payable features with all plans — although you can enter only five bills per month with the Early plan. The software’s bill management tools are detailed, giving you the ability to access all of your bills online in one place, make batch payments and schedule them in advance. In contrast, FreshBooks includes basic accounts payable tools like bill tracking with the Premium plan and doesn't offer them with the Lite or Plus plans.
When you might choose FreshBooks instead
If you want to work directly with a customer service representative over the phone, FreshBooks offers better options than Xero with phone support available 8 a.m. to 8 p.m. ET Monday through Friday. While there is no live chat support, FreshBooks does have email support. Emails are typically addressed within 90 minutes and phone calls are usually answered within three rings.
Xero doesn’t offer the opportunity to call a representative directly for assistance. Instead, they will call you if you provide a phone number. You can reach support by raising a case (similar to filing an IT ticket) on the Xero website.
Time and mileage tracking
FreshBooks includes unlimited time and mileage tracking with all plans. You can automatically track time using the mobile app, a browser extension or third-party apps like Trello and Asana. In addition, you can bill for tracked hours, track and manage time for a specific project and allow your employees to track their time (if you’re using the team members add-on).
Xero only offers time tracking in its Established plan as part of the Expenses and Projects feature sets.
FreshBooks and Xero alternatives
Pricing: Free and up.
Zoho Books stands out for its 24/5 customer support, strong feature set and affordability. It’s ideal for businesses that already use in-house Zoho apps, since it has limited third-party integrations beyond that.
» MORE: FreshBooks vs. Zoho Books
Pricing: $30 per month and up.
QuickBooks Online is an industry standard for small-business accounting and delivers on its robust feature set, ease of sharing with accountants and range of integrations. On the downside, it can be expensive compared to other options like FreshBooks and Xero.
» MORE: Xero vs. QuickBooks Online
Wave Accounting is free, but it doesn’t skimp on invoicing capabilities, making it a good solution for very small service-based businesses and consultants. However, due to its limited feature set and lack of audit trails and third-party integrations, it’s not ideal for small businesses that have the potential to grow.
» MORE: FreshBooks vs. Wave Accounting
NerdWallet’s accounting software ratings favor products that are easy to use, reasonably priced, have a robust feature set and can grow with your business. Ratings are based on weighted averages of scores in several categories, including range of features, cost, ease of use, accounting standards compliance, scalability, ease of sharing with accountants, integrations, customer support, pricing transparency and availability of a free trial period. Learn more about how we rate small-business accounting software.
These ratings are meant to provide clarity in the decision-making process, but what’s best for your business will depend on its size, growth trajectory and which features you need most. We encourage you to research and compare multiple accounting software products before choosing one.
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