Practical Ecommerce

QuickBooks Online vs. Xero: Which Is Better?

Most ecommerce merchants are familiar with QuickBooks and QuickBooks Online. Xero, a hosted accounting platform for small businesses, is less known. As a CPA for small-to-midsized ecommerce companies, I prefer Xero, for the reasons set forth in this article.

Xero: Product Overview

Xero was built to be an Internet accounting solution. It is not a streamed down version of desktop software

QuickBooks Online has always felt, to me, like a downsized version of QuickBooks desktop. While the online version has improved, it is not as user friendly as it should be.

QuickBooks desktop provides small-to-midsize businesses with most of their accounting software needs. However, it has to be installed on a hard drive and its cost increases for multiple users. It also requires a server for multiple users. And to share information with a CPA, a merchant must grant access to the server or exchange downloaded files. In addition, QuickBooks forces you to update its software every few years.

All three products — QuickBooks desktop, QuickBooks Online, and Xero — have similar functions, as follows.

  • Bank synchronization
  • Bank reconciliation
  • Accounts payable
  • Accounts receivable
  • Inventory
  • Invoicing
  • Bill management
  • Payroll
  • Financial reporting
  • Cashflow quick views
  • Multi-currency
  • Document sharing
  • Quotes

Why I Prefer Xero to QuickBooks Online

If you insist that your accounting software be installed on a hard drive, go with QuickBooks desktop. But if you want to take advantage of technology, invest in an online solution. The best option, in my view, is Xero.

Bank reconciliation made simple. The ease of reconciling bank accounts is the primary difference between Xero and Quick Books Online. The accuracy of your bank account(s) is very important. Money going in and out needs to be recorded in a timely manner.

Both products allow its users to sync bank accounts and download bank transactions. This allows you to match previously recorded transactions with the bank transaction with the click of a button.

But Xero is better three areas.

  • Easy dashboard access. When you log into Xero, you immediately go to your dashboard where your bank and credit card accounts are listed. Under each account is a blue tab that tells you to reconcile x number of bank transactions. With this reminder, you are more likely to reconcile a few transactions daily instead of copious transactions at month end.
  • Matching transactions. If transactions can’t be matched, Xero offers its best recommendations. QuickBooks Online has more of a search engine for matching transactions.
  • “Discuss” tab. On the bank reconciliation screen in Xero, there is a “Discuss” tab for all downloaded bank transactions. If you aren’t sure how to classify something, type a question here and save it. You can then alert your accountant or bookkeeper, and he can tell you how it should be classified. It’s easier to do it right the first time instead of fixing later.

Another item that makes reconciling easy is bank rules.

Bank rules. Bank rules define how a bank transaction will be recorded. For example, you can make a bank rule for Staples, the office supply retailer, and all transactions that have this description will automatically be classified as office expense. Xero has had this function for a long time. QuickBooks Online incorporated bank rules only last year. It is one of several examples of QuickBooks Online playing catch up to Xero.

Here is a video explaining how bank reconciliations work in Xero.

Accessibility and collaboration. Business owners should spend the majority of their time increasing revenue, not getting frustrated and being uncertain of their financials. Online accounting systems like Xero allow you to access your accounting records from anywhere at anytime. All you need is Internet access.

If you do your bookkeeping, your accountant can now access your information in real time. If you outsource your bookkeeping to an accountant, both of you can see the same information at the same time.

Either way, having your accounting system online allows for quicker and easier communication. Financial decisions and discussions happen sooner because information is shared faster due to the ease of accessibility.

Add-ons. No accounting system is perfect, in my experience. Every business is different and has its own accounting needs. To help businesses create the best accounting system, Xero and QuickBooks Online have add-ons, which are third-party extensions that increase functionality.

Xero claims, on its website, 350 plus add-ons. QuickBooks Online doesn’t state the number of add-ons. It’s almost certainly much smaller than Xero.

Popular ecommerce add-ons for Xero are Stitch Labs (inventory management), Shopify, PayPal, and Magento.

Xero's marketplace contains 350 add-ons.

Xero’s marketplace contains 350 add-ons.

Files. As a CPA providing outsourced accounting services, “Files” is my favorite Xero function. Each Xero account has a unique email address to send electronic documents for storage and for attaching to transactions. If you don’t want to email a document, just drag and drop into Files or attach it to a bank transaction.

From Files, you can attach a bill to an accounts payable transaction or a receipt to a bank transaction. Xero Files allows you to keep all accounting documents in one place and attach documents to specific transactions for easy reference.

For those who outsource their accounting, you no longer need to mail or scan copious documents at month end. As you collect documents, email them to Xero Files. If you have debit or credit card receipts, take a picture of them with your phone and email them to Xero files.

Prices and users. Xero’s monthly cost depends on the version. The “Starter” plan is $9 per month. The “Standard” plan, which includes unlimited transactions and payroll for up to five employees, is the most popular, at $30 per month. The “Premium” plan, which allows for multiple currencies and payroll for up to 10 employees, is $70 per month. All of Xero’s prices include multiple users. In other words, you don’t have t additional expense to add users.

For QuickBooks Online, there is the “Simple Start” plan, at $12.95 per month for one user. “Essentials” is $26.95 per month for three users. The “Plus” plan is $39.95 per month for up to five users.

Try Both Options

For my CPA firm, we think Xero is a much better solution. But try each option before you decide. Both offer free 30-day trials.

Enter a few test entries to try each product — not a full month’s transactions, just enter a few test entries. Create some fake invoices, bills, and checks. After doing this in each product, you should have an understanding of each one, to make an informed choice.

Mac McSwain

Mac McSwain

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  1. Elizabeth Hollingsworth March 30, 2015 Reply

    Timely article, Mac, as I’m going to use Xero with Shopify for the launch of my new website so I’m glad to read your thoughts!

    • Mac McSwain March 31, 2015 Reply

      I’m glad this was helpful.

    • Jack Faye December 8, 2016 Reply

      I have been using Slickpie( online accounting software for a number of months after moving away from Quickbooks. It’s 100% free online accounting software . It provides invoice templates and document upload feature. Share and Collaborate, Credit cards and PayPal transactions is easily done with it.

  2. mukesh March 30, 2015 Reply

    Thanks Mac. I am in India using Tally software. While searching for quick books i came across your informative article. I shall also explore Xero. Thanks Bro. Best wishes.

  3. Carlos Rivera March 31, 2015 Reply

    Awesome! Never heard of Xero, but I am so glad I read this article today. Thank you!

  4. Robert R. March 31, 2015 Reply

    “QuickBooks Online doesn’t state the number of add-ons. It’s almost certainly much smaller than Xero.” Should do more research before publishing articles like this. Quickbooks Online integrates with over 400 app partners; maybe more.

    • Mac McSwain March 31, 2015 Reply

      Thanks for the update. I’m happy to read that the app partners are that many.

  5. Wrenze Hudson March 31, 2015 Reply

    Actually neither company publishes their actual number of add-on partners, probably because this number is changing constantly. I have followed Xero closely and watched their add ons grow rapidly over the last year; I estimate the number to be around 400 now. There is a good overview here:

  6. DAVID KLAUSMEYER March 31, 2015 Reply

    I’ve tried them both. I like XERO the best.

    • Robert R. April 1, 2015 Reply

      Just curious…when did you try Quickbooks Online? Recently read a report where Intuit claims to have over 840,000 small businesses using quickbooks online. Trying to determine if its the product or marketing that is helping to outpace Xero substantially in the U.S.

      • Mac McSwain April 1, 2015 Reply

        I have to use QBO at least once a month. We have one client left on QBO that we do outsourced accounting services for. Everyone else is on Xero. We will be converting him to Xero after 4/15. I believe the answer to your question is the marketing and name brand recognition. QB’s is the 800lb guerrilla in the small to midsize accounting software. However, in my opinion, that does not mean they are the best online accounting software product.

  7. Mike April 1, 2015 Reply

    I would have loved to have stuck with QuickBooks online out of loyalty, but it’s just too damn painful and inefficient. I like Xero’s software, its design and its brand – just a shame that half my clients are old school!

  8. Woody Adams April 2, 2015 Reply

    Hi Mac, Woody Adams here, QBO Expert and Product Specialist from Intuit. I read your piece and always love a good hearty discussion on the current options for accounting pros and hoped to clarify a few points in your article. The QuickBooks Online small business ecosystem approach is focused on connecting small businesses, accountants and developers in a way that makes each party more successful. We continue to support users of QuickBooks desktop, but we shifted our business strategy to focus on the cloud almost a decade ago. In 2013, we reaffirmed our commitment to the cloud with the redesign and launch of the new QuickBooks Online in 2013. A few specific comments…

    Dashboard access: When you log into QuickBooks Online, immediately on the homepage you can see how many transactions were downloaded last night. If you click on the number, it takes you right into the bank and credit card window. You can quickly sort by matched transactions and batch add or match them to the check register. The only difference being that Xero reconciles at the point of adding/matching to register, where QuickBooks Online has a reconciliation module that is used to reconcile the bank and credit card accounts. However, this is normal workflow for QuickBooks desktop users. A lot of accountants like a separate reconciliation process as a process failsafe.

    Matching transactions: We have improved the experience and have made it much more efficient for users. If there is an exact match, QuickBooks Online matches it. If there is no exact match, QuickBooks Online will list the other options. You simply click once on the transaction line to see the other options. Then if there is no match at all, there is a tab to click that opens a window listing other possibilities, which can be filtered by transaction type.

    “Discuss” tab: QuickBooks Online has a discussion feature too, but on the actual transaction itself, not in the bank and credit card window.

    Bank rules: We have tested both bank rule systems in Xero and QuickBooks Online, I prefer QuickBooks Online for its simple to set up and apply. If I want, the rule even creates transactions by type. Though no winner here to me, the approach to QuickBooks Online is drop dead easy and effective.

    Accessibility and collaboration: QuickBooks Online does this well and accountants have their own free platform in QuickBooks Online Accountant, offering more accountant specific tools to leverage inside the QuickBooks Online file to increase efficiency when working in the file.

    Add-ons: There are nearly 1,000 apps that integrate with QuickBooks Online, about 800 of which are unique apps developed for a small business’s specific needs. On the other hand, 200 of the 1000 apps are downloadable on and broadly available to any QBO subscriber to use. We also partner with critical apps that a small business would actually use daily, such as Shopify, SOS Inventory and PayPal.

    For accountants: QuickBooks Online Accountant has a document sharing portal as well, which allows clients to upload docs directly to their accountants. The documents are then stored in QuickBooks Online Accountant and attached to the client’s record. In QuickBooks Online, document attach is supported across most transaction types.

    If you want a demo, have more questions or want to discuss 1:1, please feel free to reach out to me at Thanks, Mac.

    • Maximillien June 30, 2015 Reply

      Hey Woody, some of your examples, particularly the one on matching transactions are just examples of how you’re behind the eight ball – you just spend your time trying to copy Xero. If you focused on your customers, you wouldn’t have to copy Xero.

      “QuickBooks Online has a reconciliation module that is used to reconcile the bank and credit card accounts. However, this is normal workflow for QuickBooks desktop users.” – I think you missed the point about qhat QBO should be about… and that is NOT to just be an online version of QB desktop.

  9. Megan Matt June 19, 2015 Reply

    This is very helpful, Marc. I think the file storage aspect is huge. As we go paperless, it can be annoying to have to carve out virtual storage space so whenever the document can go to the expense account where it belongs it just feels satisfying.

  10. Top Rated Accounting Software July 15, 2015 Reply

    Great article, Mac! I also prefer Xero to QB for its simplicity and available features. Any questions I have are answered quickly via their online chat.

    Another great option to note is that the conversion from QB to Xero is free and only takes about 3 hours….even on your free 30-day trial!

  11. Ted September 2, 2015 Reply

    The price difference between starter and standard is too steep for a company that might barely go over the limited transactions and has no payroll. I’m a QB Pro Advisor and I think QBO is awful, but I can pass on the standard version for only $9.99 per month. I don’t see any info on Xero’s Partner Program, specifically if there’s a wholesale price that may be passed along to clients.

    • Ted September 8, 2015 Reply

      Rebuttal to my own review. Xero is great if you need everything, including currency exchange. But they have a high pressure method to get partners and I was scared away. I hope QBO improves, because I have no inclination to switch again to Xero. The interface is not much better…if at all.

  12. Seema December 7, 2015 Reply

    Amazing information. Visit and like Fb page for the Quickbooks Support Information.

  13. David December 23, 2015 Reply

    EVERYTHING I try to do with Quickbooks Online there is some error or some problem that makes it not work the way it should. There is so much potential and I picked it over Xero because it was easier to set up and the interface seemed cleaner and more intuitive. But it’s been nothing but problems. I wanted to like and gave it so many chances but simply put it is terrible software.

  14. david December 28, 2015 Reply

    I’ve done QBO after having done QB for more than 10 years. After discovering (and being hobbled) by a major glitch in their software, i discovered their real problem: customer service. Google it.
    I have never been treated as badly as i had by a company I pay money to. Ever. I was told, if you want our glitch fixed, you’re going to pay. If you dont like it, pound sand. Granted, it was in much saltier terms, but that was it. Now, I dont care what I use, it wont be an Intuit product, for sure.

    • Eva January 27, 2016 Reply

      I think that big software companies – no matter the sector they are in – usually are to big to react quickly. They have very long awating time until your particular issue is fixed.I was using freshbooks for years, but then realized that there are few functionalities missing. Never used Quickbooks or Xero because the UI seems to be too overwhealming for me. This market is full of fishes and sometimes it’s good to start with smaller player like the one my friend recommended to me – simple UI, beta version which I can see they are still working on continous improvement and all features I need to manage time, invoices and expenses for my company.

  15. Juliann Bichler January 9, 2016 Reply

    How can I find out if Xero is really to receive my small home town bank statement? “Plaza Park Bank” in Waite park, MN. The reason is I have been using Wave account and we can not down load it right to Wave we have to go the quicken books.

  16. Taz Lal March 28, 2016 Reply

    Your article is informative and I am so glad you are don’t work for either company :)

    What are the hard costs associated with each one, would you know? Being a very small business, I need to look at that as well.

  17. John Pannell May 3, 2016 Reply

    Useful article. Looking at UK non-offer pricing (May 2016) for the entry level Quickbooks is £7 per month vs Xero at £9 per month. It appears that Xero restricts to 5 bills/invoices whilst I could not see a restriction for Quickbooks.

  18. Jonathon Miller August 8, 2016 Reply

    I so disagree. Xero is so complicated and counter intuitive. Quickbooks has just been a breeze to use. Perhaps if for large corporations Xero makes sense but for small operators Quickbooks is just SOOOOOO much better and so much cheaper.

  19. Todd August 11, 2016 Reply

    Can your software handle only ten employees?

  20. John Ermias July 17, 2017 Reply

    SlickPie is better than Quickbooks for accounting because of its innovative features like automation technology (auto payment reminder, auto recurs to regular clients, auto data entry tool-MagicBot). It’s easy to use and user-friendly tool. It helps with all types of small business and freelancers in their accounting and invoicing operations – It’s other features are – online billing, invoice management, expense tracking, online support and more.