Unlike many accounting applications, Xero allows for unlimited users at no extra cost, making it especially attractive to small businesses with several employees. It supports every element of financial management that both young and growing companies need, using AI effectively in areas like bank account reconciliation and offering advanced reporting abilities. The additions of a powerful inventory management add-on and an Avalara sales tax integration are welcome improvements, though we still wish that time entries didn’t have to be tied to projects and that transaction templates were easier to edit. Overall, FreshBooks and Intuit QuickBooks Online remain our Editors’ Choice winners for their intuitive operations, flexibility, and smart selections of accounting features.

How Much Does Xero Cost?

Xero offers three pricing levels and a free 30-day trial. The Early tier ($20 per month) has monthly limits of 20 invoices and five bills. The Growing plan ($47 per month) adds unlimited billing, invoicing, and quotes. The Xero Established version I tested ($80 per month) is the only one that supports multiple currencies. It also offers projects, advanced analytics, and employee expense claims. You can connect Xero with Gusto for payroll.

The version of QuickBooks Online that’s most similar to Xero Established costs $99 per month. One of the most affordable accounting services for small businesses is Patriot Software Accounting, at $30 per month for an equivalent tier. Zoho Books is $60 per month for a version similar to Xero Established.

Getting Started With Xero

After you set up an account, Xero suggests a handful of accounting tasks to help you learn the ropes. You can play with the app using a demo company and fake data, which is the best place to start practicing. When you’re back in your live account, you should spend some time establishing your preferences for settings like user permissions, currencies, invoices, and online customer payments. Xero’s onboarding experience benefits from an improved UI and a new invoice preview tool.

Keep in mind that some significant new features should roll out in the coming months. One is traditional bank account reconciliation, which will allow you to compare your monthly bank statements to your Xero account registers. Meanwhile, integrations with Bill will give you powerful, industry-standard tools for managing and automating accounts receivable and payable. As mentioned, the Avalara-backed feature helps Xero automatically calculate sales tax on invoices.

I like the way Xero arranges its accounting tools and data overall, though there’s nothing exceptional about the UI and navigation tools. Some pages are spacious, while others feel cramped. It’s not as aesthetically pleasing as FreshBooks, especially in areas like invoices, contact records, and transaction registers, which are particularly plain. It looks professional and serious. A simple toolbar divides Xero’s features into logically organized menus, and individual working pages are mostly clear. 

Xero’s dashboard provides a good launching pad for the experience. It displays the charts and numbers you need at the beginning of a work session, like account balances, bill and invoice status, and total cash in and out. You can drill down here to see underlying transactions and create new ones. 

Using Sales Tools in Xero

Xero has very generous import capabilities. In addition to adding customer data in CSV or TXT format, you can download templates for data like bank statements, budgets, Charts of Accounts, fixed assets, inventory items, and invoices. For manual entry, the record templates cover basic contact details capably but lack extras that Zoho Books has, like portal language, price list, and reporting tags. 

Templates are available for one-time and repeating invoices and quotes, and you can queue up multiple statements to print or email. Although Xero’s thorough, step-by-step support articles can help with this task, the app doesn’t offer chat, email, or phone help (Patriot Software Accounting offers all three). These tools aren’t as graceful to use—nor are the data fields as plentiful—as they are in QuickBooks Online. You must make any advanced modifications in Microsoft Word. The forms don’t miss anything major, though they don’t have FreshBooks’ state-of-the-art look.

A dedicated sales overview page displays the status of your invoices and quotes, so you know where they are in the process of being created, approved (most competitors don’t have this step), awaiting payment, and overdue. You can automate late payment reminders and accept online payments through Stripe and GoCardless, but Xero doesn’t have a dedicated payment service like Wave. 

Managing 1099s and Bills With Xero

Supplier and contractor record templates are identical to customer record templates. Competitors tailor these for the contact type. For contractors, you can create reports that feed into integrated Xero apps to create 1099s at tax time. You can also send links to contractors that take them to the W-9 forms they must complete.

You can email or upload bills to Xero. These options are becoming more common, though not every service allows this yet. The app then pulls details from the bills and enters them on Xero forms. You can also enter them manually and record payment—though there’s no online bill pay such as QuickBooks Online offers. Xero also supports purchase orders.

Does Xero Track Inventory?

Xero allows you to track inventory, but it lacks the flexibility of QuickBooks Online. For example, you can’t set a reorder point and have to go through the inventory adjustment process to add your opening stock level (QuickBooks Online handles this during the creation of an item record). You can’t bundle items as assemblies, either.

Xero’s new add-on, Xero Inventory Plus, aims to solve these problems. This integrated app is available to Growing and Established subscribers, albeit at an extra cost of $39 per month. Xero Inventory Plus is a good fit for online sellers who operate through e-commerce stores (Amazon and Shopify, with more coming) or physical stores (point of sale) that need robust tools to monitor profitability, sales, and inventory.

Tracking Projects and Profitability

Xero has tools to create, monitor, and track the profitability of projects. Each project’s home page shows transactions that you’ve assigned to it: quotes and invoices, time entries (which you must assign to projects; Xero doesn’t allow standalone timed activities), and tasks and expenses. But the project infrastructure isn’t as clear, flexible, or easy to learn as it is in FreshBooks.

Some Unusual Reports

Xero’s selection of reports suits the site’s features. These templates zero in on subsets of data I haven’t seen on small business accounting sites, like Duplicate Statement Lines and Foreign Currency Gains and Losses. Some filter options are also unusual and creative, like Profit Per Item and Outstanding Tax. Customization options are good overall, and you can save your modifications as custom reports. 

Xero has two advanced reports that provide terrific insight and analysis. One offers short-term (30-day) cash flow projections, along with suggested actions that might improve your outlook. The other, Business Snapshot, includes numerous tables and graphs that illustrate various financial ratios and metrics. I haven’t seen the latter in other accounting applications.

Is Xero Safe to Use?

Xero has multiple layers of protection for the personal and financial information you entrust to the company, including encryption when data is transferred and stored. Multi-factor authentication (MFA) adds an additional level of security. The company claims its servers and data centers have robust physical security controls, along with 24/7 monitoring and surveillance. Xero also solicits regular and independent data security audits and monitors security systems to identify and manage threats.

Decent Mobile Apps

Xero has retired the Xero Expenses app and folded its features into the new Xero Me app, which also offers some payroll data. Xero Projects lets users who don’t need access to the main Xero app still contribute to projects. The core Xero accounting app replicates some of the tools and data of the browser-based version, though there’s a lot missing. All apps are available for both Android and iOS.

The main app has an abbreviated dashboard that displays your most important numbers. Sales and purchase overviews display transaction details for all accounts. You can create new transactions and match existing ones. Customer and supplier records contain contact information as well as lists of outstanding invoices and bills. I like these apps for their simplicity and usability, and I look forward to the planned enhancements (Xero hasn’t specified what exactly these are). 

Verdict: Full-Featured Accounting

A complete solution for small and growing businesses, Xero doesn’t restrict how many people can help manage your company’s financial matters. Highlights include support for Gusto payroll, a useful inventory management add-on, and a capable collection of mobile apps. Upcoming enhancements like full bank account reconciliation and integration with Bill (for accounts receivable and payable) should make Xero even more competitive. Transaction templates could be simpler to customize, however, so we continue to recommend FreshBooks and QuickBooks Online as our Editors’ choice winners.