Cloud-based accounting software is useful for all businesses, but they are incredibly helpful for small businesses in particular. They can make a massive difference in the performance of small companies by saving them a lot of time and money that could’ve otherwise been spent on tedious tasks done manually.
If you’ve been looking for a cloud-based accounting solution, then you’ve probably come along many names – Xero and FreshBooks must’ve been mentioned in most of the articles you read/videos you watched. This is because both solutions are affordable, cloud-based platforms designed to automate and simplify accounting for businesses.
But what are the differences? Which one best fits your business? To help you find the answer to these questions, we are going to put Xero and Freshbooks in a head-to-head comparison to see how they can meet your needs.
FreshBooks is one of the best cloud-based accounting solutions you can find. It helps over 5 million businesses streamline time tracking, client invoicing, and fast track their sales cycle. The solution is fast, reliable, and can turn complex financial processes into an enjoyable experience.
With FreshBooks, users can manage invoices and recurring subscriptions, and collect online payments through PayPal, Google Checkout, and Credit Card payments – this means you will most likely be able to untie all your finances in a single, easy-to-use, streamlined system.
Collaboration features provide faster and more efficient delivery, while the time-tracking feature helps businesses improve their efficiency.
Xero is one of the best financial collaboration solutions in the market (but its developers like to call it a “beautiful accounting software.” It is designed to be the handiest asset for managing financial activities – especially for accountants and small businesses.
Xero is user-friendly enough for anyone to use – even if they have little or small accounting knowledge. Xero offers a vast array of features and functionalities and has over 500 integrations to extend those features and functionalities even further.
FreshBooks offers a simple, sleek interface that makes matters simple. This is suitable more for small businesses that don’t need as many functions and need something clean and straightforward that’s easy to use.
Xero’s interface is more-complicated and less-friendly than FreshBooks’. However, they make up for it in the number of functions they offer through this dashboard and the wealth of information that is available. With some clicks, users will be able to get an overview of the company’s finances.
Winner: It depends: FreshBooks is more suitable for small business and inexperienced users. At the same time, Xero’s many features will please the more experienced user, even if they find it confusing at times.
FreshBooks was designed as an invoicing tool first and an accounting solution second. Over the years, they have added many features and functionalities to the software to be more helpful to a broader range of businesses, but it has also remained to its invoicing roots.
Cloud invoicing is easily streamlined with an online payment gateway. This tool is efficient in collecting payment without needing to have discussions with clients regarding these. It also offers multi-currency invoicing so you can bill customers in their local currency.
Although not built around the functionality of invoicing clients, Xero still does a pretty good job. It even offers the ability to set reminders on invoices, and you receive a notification when the client doesn’t pay in time. Xero will also auto-send those reminders to clients, which is useful if you have many clients that don’t pay in time.
Winner: FreshBooks. The invoicing in FreshBooks is just a little bit smoother than it is in Xero, which makes sense considering the software was built around the feature.
Financial Reporting and Monitoring
Forget spending hours on manual data entry and spreadsheets with FreshBooks’s financial reporting feature. You will be able to generate financial reports, profit and loss reports, and expense reports in just a few clicks. It can also handle taxing just as quietly, or you can export your reports to an accessible file format (such as CSV) and share it with your accountant or tax advisor.
Financial Reporting is one of Xero’s strongest selling points. Fill in the filters you would like to see included, and voila! You have just the report, tailored specifically to your unique needs.
Standard Reports such as Balance Sheets, Income Statements, and Cash Flowsheets are also available in Xero. The management reports you can get from the software will give you a full picture of the company’s profitability.
Xero also has an advanced Business Performance Tool that can track equity ratio debts and net value per sale.
Winner: It depends. FreshBooks offers more reports, but Xero offers more customizable reports with its filters.
Both applications integrate with a large number of 3rd party applications and services.
FreshBooks integrates with a wide range of business systems and applications. These include (but are not limited to) :
Xero has partnered with over 400 vendors to make their solution as streamlined and useful as could be. Most would say it has paid off.
Those integrations include (but are not limited to:
Evernote, Square, Harvest, Squarespace, PayPal, ADP, Synergy 8, Deputy, Vend, Neatly, Stich Labs, and Expensify.
Winner: Xero – Judging by the sheer number of available integration, but it’s a close call.
FreshBooks’s pricing plans are designed to suit most businesses and teams. All ideas come with all features and functionalities, with the difference being the number of active clients you need to bill.
- Lite – $15/month: Bill up to 5 clients
- Plus – $25/month: Bull up to 50 clients
- Premium – $50/month: Bill up to 500 clients
The features you get with any plan are:
- Customize, send, and track unlimited invoices
- Automatic reminders for late-payments and fees
- Add and categorize expenses
- Accept online Credit Card Payments
- Track time by projects and clients
- Reports and Dashboards
- Security and Backup
A 30-day free trial is available to help you test the features before committing. FreshBooks also offers an annual subscription, while Xero does not.
Unlike FreshBooks, Xero doesn’t offer all the functionalities and features to all users. The functions, features, and number of payrolls, invoices, and quotes available to you change according to the plan you choose:
- Starter – $9/month: Comes with five invoices and quotes, five bills, and 20 bank transactions
- Standard – $30/month: Comes with unlimited invoices, quotes, statements, and bank transactions. Up to 5 payrolls.
- Premium – $10-$70/month: Comes with unlimited invoices, quotes, bills, and bank transactions. Up to 10 payrolls. It also offers Multi-Currency support.
A 30-day free trial is available to test the software before making a commitment and choosing a suitable plan for you.
Winner: FreshBooks. Although Xero starts lower, it goes higher, and FreshBooks offers the same features for all users.
Both are web-based and offer mobile applications for devices running on both Android and iOS platforms. They can work on any device as long as it’s connected to the Internet.
Winner: A Tie.
Xero and FreshBooks also offer excellent customer support. Both offer support via Email and Phone. Both have a Ticket system and provide training on the software.
Winner: A Tie.
Let’s sum up all the features that come with each software:
Accounting Reports and Taxes:
As you can see, regarding the overall number of available features, FreshBooks seems to take the cake. However, this should not be the selling point, as you may not be able to make use of all those features and may end up confusing yourself.
If you want to look at another option to make an even more informed decision, you should check out this QuickBooks VS FreshBooks Comparison.
We hope you found this comparison helpful if you did share it with your friends. If you have any questions or comments, feel free to leave them below, and we will get back to you as soon as possible.