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In this review, I’m going to share my analysis and evaluation from my hands-on experience with Xero. But first, if you’re just beginning your search for the best accounting tools, check out my picks for the best accounting software. You probably already know that Xero is among the most popular accounting tools out there, but you need to better understand what’s good (and not so good) about it.

This in-depth Xero review will walk you through the tool's pros and cons, features and functionality, and more to help guide you to better understand its capabilities and its suitability for your needs.

Screenshot of Xero software dashboard for Hornblower Enterprises showing a graph of bank account balances, account watchlist with monthly and yearly figures, and a breakdown of invoices owed, including those that are overdue.
I like how Xero's financial overview feature, pictured here, highlights account balances, business performance metrics, and invoice status.

Xero Software Product Overview

In this Xero review, we delve into how Xero accounting software streamlines a range of accounting tasks through its efficient user interface, making bookkeeping more accessible and manageable for small business owners. Primarily designed for small to medium-sized enterprises, Xero simplifies the often complex world of business accounting with features like online invoices, bank reconciliation, and detailed accounting reports, appealing to business owners seeking clarity and control over their finances.

The platform addresses critical pain points by automating routine tasks, enabling business owners to easily reconcile transactions with bank statements, view short-term cash flow, and handle double-entry bookkeeping, ultimately saving time and reducing errors. Among its best features is the ability to accommodate an unlimited number of users in its growing plan, providing flexibility for businesses with an established plan for expansion, and garnering positive user reviews for its comprehensive approach to financial management.

Pros

  • Real-time Reporting: Xero offers live updates, allowing for immediate, up-to-date financial insights, crucial for making informed business decisions.
  • Integration Choices: The software supports various third-party apps, facilitating a more tailored fit for your business's unique needs.
  • Automated Transactions: Xero excels in efficiency by importing bank transactions, reducing manual data entry and the potential for errors.

Cons

  • Learning Curve: New users often face initial challenges due to Xero's extensive features that require familiarity and practice.
  • Limited Customization: Some businesses find the invoice and report customization options restrictive, hindering branding consistency.
  • Customer Support: Reaching customer service can be less direct, with no instant phone support, leading to potential delays in issue resolution.

Expert Opinion

In my analysis, Xero stands strong in a crowded market due to its robust feature set and intuitive design. Its pricing model aligns with the features it offers, striking a balance rarely seen in other similar tools. The functionality extends from excellent reporting capabilities to a wide range of app integrations, setting it apart. However, where it falters is its initial complexity and occasional limitations in customization and support responsiveness.

When selecting an accounting tool, businesses craving depth in financial tracking will find Xero a strong contender. But for those needing extensive customization or direct, immediate support, it's worth comparing with alternatives. Based on functionality and ease of onboarding, I find it best suited for small to medium businesses needing comprehensive financial monitoring.

Xero: The Bottom Line

What sets Xero apart in the competitive landscape of accounting software is its commitment to real-time financial reporting and user-friendly design. These elements combine to provide businesses with unparalleled access to immediate, actionable financial insights. Particularly impressive is its automated data import feature, which minimizes manual input, and its extensive suite of third-party integrations, a boon for businesses looking for a cohesive financial management system.

Its ability to give a clear, comprehensive financial snapshot stands out, especially valuable for decision-makers needing clarity without sifting through complex data. In essence, Xero harnesses technology to offer efficiency, a clear overview, and above all, business financial transparency.

Xero Deep Dive 

Here's a deep dive into Xero features, best use cases, pricing, customer support, and other purchase factors.

Product Specifications

  1. Automated Bank Feeds - Yes
  2. Invoicing - Yes
  3. Expense Tracking - Yes
  4. Accounts Receivable - Yes
  5. Accounts Payable - Yes
  6. Inventory Management - Yes
  7. Time Tracking - No
  8. Budgeting - Yes
  9. Fixed Asset Management - Yes
  10. Purchase Orders - Yes
  11. Tax Management - Yes
  12. Multi-Currency - Yes
  13. Financial Reporting - Yes
  14. Data Security - Yes
  15. Mobile Access - Yes
  16. Payroll Processing - Yes (in select markets)
  17. Project Management - No
  18. Debt Tracking - Yes
  19. Cash Flow Statement - Yes
  20. Balance Sheet Reporting - Yes
  21. Profit and Loss Reporting - Yes
  22. Document Management - No
  23. Credit Card Processing - No
  24. API Access - Yes
  25. Third-Party Integrations - Yes

Xero Feature Overview

  1. Automated Bank Feeds: Xero automatically imports and categorizes your bank transactions, cutting down on manual data entry and providing real-time financial data.
  2. Invoicing: Customizable templates allow for quick, professional invoice creation, speeding up the payment process with online payment options.
  3. Expense Tracking: Track and manage company expenses directly, simplifying the reimbursement and accounting process.
  4. Accounts Receivable/Payable: Manage money coming in and out effortlessly, helping maintain a clear picture of your business's financial health.
  5. Inventory Management: Control stock levels and get real-time updates on inventory, which is essential for supply chain and sales management.
  6. Budgeting: Create comprehensive budget setups, forecasting financial scenarios and planning accordingly.
  7. Fixed Asset Management: Monitor the value of your company's fixed assets accurately, from purchase to disposal.
  8. Tax Management: Xero simplifies tax compliance with dedicated tools, significantly easing the usually complex tax calculation and submission process.
  9. Multi-Currency: Handle multiple currencies with ease, making it ideal for businesses dealing in international markets.
  10. Financial Reporting: Access detailed financial reports that offer profound insights into business performance, aiding strategic decision-making.

Standout Functionality

Xero's unique proposition in the finance software market hinges on its user-friendly design, a strong emphasis on automation, and real-time financial data insights:

  1. Real-time Financial Data: Unlike many traditional systems, Xero provides live updates, giving businesses an immediate view of their financial state, which is crucial for informed decision-making.
  2. Extensive Third-Party Integration: Xero stands out with its open API and expansive list of integration partners, meaning businesses can significantly extend their capabilities beyond basic accounting.
  3. Automated Bank Transaction Imports: The software automates much of the time-consuming data entry tasks by syncing with bank accounts and bringing transactions into Xero, a feature not always as seamless or integrated in other platforms.

Integrations

Xero provides out-of-the-box integrations with a plethora of third-party applications across e-commerce, point-of-sale, time tracking, and more, enhancing its functionality. Notable integrations include Stripe for payment processing, HubSpot for CRM, and Shopify for e-commerce, among others. Its open API allows for extensive customization and integration with existing business software, providing flexibility and broader use cases.

Additionally, Xero's marketplace offers a variety of add-ons across different categories, enabling businesses to augment and refine their financial management processes.

Xero Pricing

Xero offers three main pricing tiers, and its mid-range plan compares favorably with similar tools based on the features offered. However, additional costs can come into play for add-ons and premium functions.

  • Early: At $15/user/month, this plan includes basic features like sending invoices, bank transactions, and capturing bills and receipts.
  • Growing: Priced at $42/user/month, this plan removes the limitations of the Early plan, offering unlimited invoicing, quotes, and bills.
  • Established: For $78/user/month, users get additional features like multi-currency handling, expense management, and project tracking.

It's worth noting that some features may require a separate subscription or purchase of add-ons, leading to additional costs beyond the base pricing.

Ease of Use

Navigating Xero is relatively straightforward once you get accustomed to the interface, which is designed with clarity and simplicity in mind. However, the initial learning curve can be steep, especially for those new to digital accounting solutions. The onboarding process is comprehensive, offering setup assistance and a step-by-step guide, yet some users might find the abundance of features overwhelming at first. The software organizes financial information efficiently, but mastering full utilization of its reporting features can take time.

Customer Support

Xero offers several support channels, including a robust online help center, tutorials, and 24/7 customer support via email. However, the absence of direct phone support can be a point of frustration for users seeking immediate assistance for complex issues. While resources like webinars and forums are available, the response time for queries, especially those handled via email, can be longer than desired, leading to delays in resolving pressing matters.

Xero Use Case

Who Would Be A Good Fit For Xero?

In my assessment, Xero fits like a glove for small to medium-sized businesses that need a robust, comprehensive financial tool. Its loyal base mainly comprises entrepreneurs, startups, and growing companies that appreciate the platform's intuitive design, straightforward financial tracking, and expansive third-party integrations. Particularly, industries that deal with multiple client transactions, like retail or professional services, find immense value in Xero's invoicing and real-time cash flow visibility.

It’s equally suited for businesses expanding internationally, which need efficient multi-currency support. Teams looking for collaborative options also benefit, as Xero supports multiple users with varied permission levels, fostering transparency and teamwork.

Who Would Be A Bad Fit For Xero?

Xero might not meet the needs of larger enterprises or industries with highly specialized accounting requirements, like manufacturing or nonprofit sectors, which often require more tailored functionality. Businesses that prefer direct, immediate phone support may find Xero’s customer service channels lacking. Also, companies that handle high-volume inventory and require advanced inventory management features could find Xero’s options limited.

Additionally, firms needing in-depth project management integrated with their financials might find Xero’s capabilities not extensive enough, leading to reliance on additional software.

Xero FAQs

Can Xero handle multiple currencies?

Yes, Xero has a multi-currency capability, allowing you to transact in various currencies with up-to-date exchange rates.

Is there a mobile application for Xero?

Yes, Xero offers a mobile app, available for both iOS and Android, enabling access to financial data on the go.

Does Xero integrate with third-party applications?

Yes, Xero can integrate with a multitude of third-party applications across various categories like e-commerce, CRM, and more.

Can I use Xero for payroll?

Xero does offer payroll features, but availability varies by country and region due to different payroll regulations.

How secure is my data with Xero?

Xero prioritizes data security with multiple layers of protection, including industry-standard data encryption.

Does Xero offer a trial period?

Yes, Xero typically offers a free trial period during which you can test the platform's features without commitment.

Is Xero suitable for non-accountants?

Yes, Xero is designed with a user-friendly interface meant to simplify financial management for non-accountants.

Can Xero accommodate the financial management of more than one business?

Yes, you can manage multiple businesses under one subscription, but each business requires a separate subscription.

Alternatives to Xero

If you're considering alternatives, here are three other finance tools you might want to explore:

  • QuickBooks Online: Often lauded for its extensive features, QuickBooks Online is preferable if you require advanced inventory management capabilities integrated with your accounting.
  • FreshBooks: If you're a freelancer or small business that prefers an accounting tool with a strong focus on invoicing and ease of use, FreshBooks could be more aligned with your needs.
  • Wave: For smaller businesses or startups needing a cost-effective solution, Wave offers free, simplified accounting, though with fewer features.

Xero Company Overview & History

Xero is a New Zealand-based public technology company that specializes in cloud-based accounting software for small and medium-sized businesses. Established companies and growing businesses alike have adopted Xero for its modern approach to financial management. The company is publicly traded and headquartered in Wellington, New Zealand, with notable figures like Steve Vamos (CEO) steering its vision.

Xero's mission is to rewire the world of small business, making it seamless, simpler, and smarter. Since its inception in 2006, Xero has achieved significant milestones, including expanding its service offerings, reaching substantial subscriber numbers worldwide, and receiving various awards for innovation and excellence.

Summary

Summarizing this review, Xero emerges as a potent accounting solution, particularly for small to medium-sized businesses. Its strengths lie in its user-friendly interface, comprehensive feature set, and flexibility offered through various integrations. While it might fall short for larger enterprises with complex, specific needs, it remains a formidable option for its target market.

As with any software solution, I recommend you weigh Xero's pros and cons carefully against your business’s unique needs. If you have any personal insights or experiences with Xero, feel free to share your thoughts in the comments below. Your input could be invaluable for others trying to make this important decision.

Simon Litt
By Simon Litt

Simon Litt is the Editor of The CFO Club, where he shares his passion for all things money-related. Performing research, talking to experts, and calling on his own professional background, he'll be working hard to ensure that The CFO Club is an indispensable resource for anyone seeking to stay informed on the latest financial trends and topics in the world of tech.

Prior to editing this publication, Simon spent years working in, and running his own, investor relations agency, servicing public companies that wanted to reach and connect deeper with their shareholder base. Simon's experience includes constructing comprehensive budgets for IR activities, consulting CEOs & executive teams on best practices for the public markets, and facilitating compliant communications training.