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Xero is a cloud-based accounting software product that’s easy to use and integrates with more than 1,000 apps. It’s less expensive than competitors like QuickBooks Online and doesn’t charge extra for additional users, making it an affordable option for growing businesses and one of NerdWallet’s picks for best accounting software for small businesses.
Xero at a glance
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
Includes tools that help automate the reconciliation process, along with a global search function; has a simple layout and a customizable dashboard.
All three plans include an unlimited number of users.
Ease of sharing with accountants
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 1,000 apps.
Does not provide a phone number to customers but a representative will call you if necessary; no live chat support.
Plans are affordable, starting at $13 per month, but no free plan.
Includes project tracking tools in most expensive plan; has transaction tracking tags; lacks industry-specific reports; users with multiple businesses must pay for separate subscriptions.
How does Xero work?
After you start a free 30-day trial of Xero, you’ll activate the account and provide details about your business. Then, you can connect your bank accounts to Xero and decide if you'll accept electronic payments for online invoices.
When reconciling books, Xero suggests likely matches between bank statement lines and transactions entered in the software. For example, if you have an entry for an invoice of $1,000 and a recent $1,000 deposit in your bank account, it might suggest matching these two transactions. Click the "OK" icon between the two to verify the match is correct.
You can also scroll through Xero’s default chart of accounts and customize it as needed, or import an already existing chart of accounts. If you have a list of customers and suppliers, you can import that, too.
Pricing and features
Promotional discounts may apply. Xero lets new customers sign up for a 30-day free trial to test out its features. You can add Gusto payroll to any plan for an extra $40 per month, plus $6 per month per person.
$13 per month.
$37 per month.
All features in the Early plan, plus:
$70 per month.
All features in the Growing plan, plus:
With Xero, you can add an unlimited number of users to your account at each subscription level. This is a notable feature for accounting software; often, lower-tier plans allow fewer users while only higher-tier plans allow unlimited users.
You can also set permission levels for each user. For example, you can give all employees the ability to send quotes and invoices, allow some to enter expenses and limit who can see the company’s complete financial picture. To keep things organized, Xero logs every action users make and compiles the history of every transaction.
Customizable reports and dashboards
Xero helps transform the data you enter into actionable information at every subscription level. A dashboard provides a summary of your business’s financial health, including total cash in and out, outstanding invoices and overdue bills. Another page dedicated to short-term cash flow charts out how future bills and invoices can affect your bank balance over the next week or month.
Reports also are customizable, with adjustable formatting and the option to add your own formulas and groupings. For instance, you can drag and drop certain expense categories into a single subgroup — an “office expenses” subgroup could include office equipment, supplies and utilities. And if you don’t like how the dashboard looks, you can reorganize panels and hide the ones that aren’t useful.
Easy to use
Users that are new to bookkeeping won’t be overwhelmed by Xero’s simple and easy-to-navigate layout. This layout makes the reconciliation process, among other accounting tasks, particularly easy. The software shows you potential transaction matches side by side, so you can immediately see if the match is accurate without having to click anything.
» MORE: Xero vs. QuickBooks Online
One-way phone support
Xero doesn’t provide a phone number on its customer support page, but a representative will call you if necessary. This is a serious drawback if you want to be able to pick up the phone and talk through an issue or are new to accounting software and have lots of questions.
Instead, customers can visit the Xero Central support site or raise a case online. A representative typically responds to a case within a few hours.
Limits on bills and invoices in the entry-level plan
In the Early plan, the least expensive subscription, you can send up to 20 invoices and schedule up to five bill payments only. That can be limiting, even for freelancers and sole proprietors. For unlimited invoicing and bill-paying capacity, you'll need to upgrade to the Growing plan.
Bookkeeping and accounting software
$17 per month and up.
FreshBooks offers unlimited time-tracking in its lowest-tier Lite plan, whereas Xero users would have to opt into the highest-tier Established plan for that feature.
$30 per month and up.
As the industry standard, QuickBooks Online is ideal if you have a growing business with specific accounting needs — as long as you don't mind taking the time to learn the program's ins and outs. Like Xero, it can easily scale with your business.
$48.17 per month (when paid annually) and up.
Sage 50 Accounting’s Cash Flow Manager tool is a helpful feature for people who want to better understand how future transactions could impact their business. The tool also lets you adjust the time frame to see how your business has changed over time.
Free (add-ons available).
Wave is a solid choice for small businesses looking for free accounting software.
Free and up.
Zoho Books' paid plans all come with free live chat and phone support. The free plan comes with email support only.
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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