Xero vs. QuickBooks: How Do They Compare?

Choosing the right accounting software for your small business can be a game-changer. It affects everything from daily expense tracking to strategic reporting and long-term financial planning. In fact, a survey by the US Chamber of Commerce shows more than half of small businesses use accounting software, going far beyond basic bookkeeping. Today’s accounting tools offer cloud-based access, AI-powered automation, and powerful integration capabilities as standard features.

Among your options, Xero and QuickBooks are consistently ranked as two of the most popular accounting software contenders. Here’s what you need to know about these tools and how they compare.

What is Xero?

Xero is a cloud-based accounting software designed to make financial management easier for small to medium-sized businesses. It was launched in 2006 as a QuickBooks alternative and has been recognized by industry leaders for its user-friendly interface and powerful accounting features.

While remaining compliant with generally accepted accounting principles (GAAP), Xero simplifies accounting basics by automating common tasks like bank reconciliations and invoicing. This makes accounting accessible even if you don’t have extensive experience.

Xero features include:

• Online invoicing. Create invoices, set up recurring invoices, and easily track payment status. This feature helps with accounts receivable management and makes it easy for your customers to submit payments, contributing to positive cash flow.

• Bank reconciliation. Automatically import bank transactions from your bank feeds, making it easy to reconcile transactions with your accounting records. Over time, it learns how you categorize transactions, helping improve accuracy.

• Expense management. Track expenses efficiently with Xero Expenses. Employees can take photos of receipts using their mobile devices through receipt capture, which automatically extracts key data and links it directly to expense claims, significantly simplifying approvals and reimbursements. Available with Xero’s Established plan.

• Basic inventory management. Xero lets you track stock levels, manage inventory items, and monitor your cost of goods sold (COGS) for better visibility into your margins and product performance. For more advanced inventory tracking tools, integrations are available through Xero’s app marketplace.

• Multi-currency accounting. If you have international business and deal with International Financial Reporting Standards (IFRS), multicurrency accounting lets you process payments, send invoices, and manage bank accounts in more than 160 currencies with automatic exchange rate updates. Available with Xero’s Established plan.

• Project management. Xero’s tracking tools let you monitor expenses and time against specific projects, giving you clear insight into project profitability and cost. Available with Xero’s Established plan.

• Advanced reporting. Generate a variety of financial reports, including profit and loss (P&L) statements and balance sheets. You can also leverage advanced features in Xero’s Established plan, like short-term cash flow projections, business snapshots with custom metrics, and the ability to drill down into specific data points to spot trends.

• Unlimited user access. All Xero plans include unlimited users, making it a cost-effective choice for teams needing shared access to accounting data—a major advantage compared to some QuickBooks plans.

• Intuitive dashboard. Xero’s dashboard is easy to navigate and offers a real-time snapshot of your cash flow, bank accounts, and overall financial health.

If you’re a Shopify store owner looking to simplify your ecommerce accounting, Xero offers a Shopify integration. The app automatically syncs a daily summary of your Shopify sales, discounts, shipping costs, refunds, and fees to your Xero account. This provides an up-to-date view of cash flow and business performance.

The Shopify app store also has many options to connect and sync store data to Xero, including the Xero & QuickBooks Smart Sync, A2X Sync, and Xero Bridge apps.

Xero products

Xero offers several pricing plans designed to cater to different business sizes:

• Early. $20 per month. Suited for small businesses or self-employed individuals. This plan provides basic accounting features for getting started, with limits on the number of invoices and bills you can send and enter.

• Growing. $47 per month. Offers unlimited invoices and bills. It’s a good fit for growing businesses with a higher volume of transactions.

• Established. $80 per month. The Established plan includes all Growing features plus multicurrency support and project tracking tools. It’s a good fit for businesses with more complex accounting requirements or international operations.

Xero also offers optional add-ons. For example, you can integrate with inventory management tools like Unleashed or time tracking apps such as Deputy, or add enhanced analytics through reporting tools like Spotlight Reporting.

What is QuickBooks?

QuickBooks is the leading and most widely recognized accounting software, especially dominant in the US market. It is an accounting solution offering both desktop versions and QuickBooks Online plans, serving different businesses and industries. Just like Xero, QuickBooks adheres to GAAP.

QuickBooks’ all-in-one platform offers accounting tools designed to manage every aspect of your business’s finances. This includes detailed invoicing and payroll to comprehensive reporting,. Whether you’re tracking your cash flow, managing stock and inventory, or preparing for tax filing, QuickBooks ensures accurate financial management.

QuickBooks features include:

• Online invoicing and payments. Create customizable invoices, accept online payments, and schedule payment reminders. This helps with accounts receivable and maintaining cash flow.

• Expense management and bank reconciliation. Simplify financial recordkeeping by connecting bank accounts and credit cards to automatically import transactions. This allows efficient expense tracking and categorization, while streamlining bank reconciliation by matching imported transactions with your records.

• Inventory management. QuickBooks Online Plus and Advanced plans offer inventory tracking, including tracking cost of goods sold (COGS), managing stock, and setting points for reordering—great for businesses with complex inventory needs. Available on Plus and Advanced plans only.

• Project management. Tracking tools help monitor project profitability, track your and your employees’ time, and manage expenses. Available on Plus and Advanced plans only.

• Advanced reporting. Generate financial reports, including P&L, balance sheets, accounts receivable (A/R) and accounts payable (A/P) aging summaries, and trial balance reports.

• Payroll and time tracking. QuickBooks offers integrated payroll services (Core, Premium, Elite) to simplify salary payments, payroll taxes, and tax form filing. For enhanced accuracy, Essentials, Plus, and Advanced plans include built-in time tracking. This lets you monitor employee hours for simplified billing and payroll processing.

• Receipt capture. Use the QuickBooks mobile app to snap photos of receipts and automatically categorize them.

• Sales tax management. Calculate, track, and file sales tax automatically, ensuring compliance.

• App marketplace. QuickBooks offers an extensive app marketplace with hundreds of third-party applications that can connect directly to your accounting data.

Shopify users can automatically sync store data with QuickBooks using an app like QuickBooks Sync.

Sync orders, refunds, inventory, products, and fees from Shopify to QuickBooks, streamlining financial reporting and inventory management for QuickBooks users.

QuickBooks products

Cloud-based QuickBooks Online plans serve different types of businesses, with five different plans to choose from:

• Solopreneur. $20 per month. This plan (which replaces QuickBooks Self-Employed) is a streamlined option for freelancers and solopreneurs. It simplifies accounting basics, which include tracking expenses and estimating quarterly income taxes.

• Simple Start. $38 per month. Ideal for sole proprietors and small businesses, Simple Start offers invoicing, reporting, and basic income and expense tracking.

• Essentials. $75 per month. Includes all Simple Start features plus bill management, tracking time, and multicurrency accounting.

• Plus. $115 per month. Adds inventory tracking, project profitability, and as many as five users—a strong option for growing businesses.

• Advanced. $275 per month. Designed for mid-sized businesses, the Advanced plan allows as many as 25 users. It adds advanced reporting, batch invoicing, and workflow automation—ideal for businesses with more advanced accounting requirements.

QuickBooks also offers integrated payroll services (Core and Premium) and payment processing solutions with QuickBooks Payments. Another direct integration, QuickBooks Time, helps manage employee time and bill back to clients if necessary.

Xero vs. QuickBooks: What’s the difference?

Both Xero and QuickBooks are leading accounting software with several key differences that can influence your choice. Here’s an overview: