QuickBooks Online vs Xero - A Simple Comparison

While QuickBooks Online (QBO) and Xero achieve the same functions from a high-level perspective, the mechanics behind them vary enough to make each suited for different clientele. Usability, interface, and pricing differences provide points of comparison for these popular accounting platforms.

At their lowest plan levels, Xero is more affordable but QBO is a better value because it offers users many more features at a higher price point. Xero’s base plan severely limits how many invoices, bills, and bank transactions can be created. It also does not include any reporting or expense tracking functionality, making it far too simplistic for most businesses. However, the ability to add unlimited users is a strong benefit for companies that do not have centralized operations.

Their mid-level and highest-level plans are similarly priced and aimed at similar business segments, making them a more even comparison of QBO and Xero.

Receivables

QuickBooks and Xero both utilize recurring invoices, but the similarity effectively ends there when it comes to accounts receivable. Xero has a strong offering for consultants and retail shops with respect to receivables, while QBO leads across many of the remaining industries.

Customizability

QBO allows for invoice customization from within the software, offering users the choice to select different layouts and colors as well as upload a company logo. The result is a well-designed output that makes even smallest businesses appear extremely professional. 

Xero requires that a custom template be uploaded after being created in Excel or elsewhere.

• Use Case: Less design savvy business owners will benefit from the WYSIWYG QuickBooks Online invoice builder.

Payment Reminders

With QuickBooks payment reminders can be individually set, allowing more customization for key accounts. This is an essential feature for businesses that offer flexible payment options to select customers. It is also helpful for companies with customers that pay by check, require purchase order approval, or have negotiated longer payment terms.

On Xero all accounts are automatically notified seven days after the invoice due date if payment has not been received.
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• Use Case: QBO is a better solution for businesses in the growth stage that are trying to expand their customer portfolio with larger companies.
  

Inventory Tracking

Xero integrates invoicing and inventory tracking at every plan level, making it a cost-effective solution for online retailers of all sizes.

QBO does not include inventory features as a standard offering, but they can be added for a fee. Typically, however, retailers that want to use the QuickBooks platform and have inventory needs will benefit most from purchasing QuickBooks Desktop instead of adding these features onto QuickBooks Online.

• Use Case: Xero is better for smaller retailers, who need inventory tracking features on a budget.

Hourly Billing

Xero integrates with time tracking apps and invoices customers based on hourly rates.
While hourly billing is technically available through QBO as well, it is much more difficult to achieve. Integrated project management tools allow for time tracking but the subsequent billing is much trickier.

• Use Case: Xero saves consultants and service providers significant time when billing clients.

Terms and Conditions

QBO contains a field on invoices that businesses can use to include notes or provide terms and conditions for customers.

Xero does not offer this same capability, necessitating that companies offer terms and conditions separately. While this may seem like a minor difference, service providers that require acceptance of terms from customers before providing services may have trouble obtaining it (or enforcing the terms later) because they have to send terms and conditions separately.

• Use Case: Service providers with legally binding terms will find the most legal protection when using QBO and including a link to the terms and conditions on the invoice with phrasing like “Payment for this service constitutes acknowledgement of and agreement with the terms and conditions provided above.”

Payment Collection

QuickBooks easily integrates payment processing into invoices, giving customers the option to click and pay directly from within invoices. The result is expedited payment and greater customer satisfaction.

Xero requires customers to pay invoices through a third-party payment processor like PayPal, adding an extra step between customers receiving their invoices and the business getting paid.

• Use Case: When it comes to payment collection, eliminating barriers for customers will always reduce the time to get paid. QuickBooks offers superior payment collection options, making it the preferred choice among businesses that prefer to be paid quickly.

Payables

Unlike QBO that provides robust reporting and tracking capabilities across all plans, expense tracking is only available on Xero’s highest plan level. However, even without that functionality, Xero still offers some advantages when it comes to accounts payable.

Bills

Xero’s biggest competitive advantage is in new bill creation and payment. It is incredibly simple to create recurring bills in Xero for predictable expenses like utilities. The result is a user-friendly solution that takes the sting out of bill paying. Additionally, Xero separates upcoming and outstanding bills to make it easy to keep them organized and pay them on time, which is why it is viewed as a more forward-looking accounting solution.

QBO has far more steps to create new bills and recurring bills can only be created from an existing bill that has already been paid. This creates inefficiencies because users have to wait until a bill comes due and is paid off before generating subsequent bills, duplicating work.

• Use Case: Xero is better for companies that have substantial recurring bills and organizations that need a more forward-looking perspective regarding expenses. Xero is also preferable for businesses with fewer people because adding new bills and managing ongoing bills is easier, which is helpful in organizations where employees are stretched thin.

Lending

QuickBooks is one of the few accounting solutions that is large enough to offer their own short-term lending for businesses.

Xero and other competing platforms may promote third-party financing options to receive a commission for referrals, but none provide their own offerings.

• Use Case: Organizations that need quick funding to pay expenses will benefit from using QBO because of its available integrated lending.

Payroll

Neither solution offers payroll functionality as a standard feature. However, QBO provides the option to add payroll services onto their plans for an additional fee.

Xero does not have any payroll features, but it integrates with various payroll apps.

• Use Case: QBO is the top choice among organizations with more employees and those going through hiring pushes, especially those that do not have their own in-house Human Resources teams.

While QuickBooks remains the most popular online accounting platform among business owners nationwide, Xero is the top alternative. 

The Accounting Solutions Partners team has expertise with many accounting software systems. If you need help, take a moment to reach out to us here >