Is Xero A Viable Alternative to Quickbooks For A Tech Startup?

By February 26, 2015 July 14th, 2017 Accounting Software, xero

There is a lot of chatter right now in the blogosphere comparing QuickBooks and Xero.

Which platform is better, has more potential, has the most features, etc. I’ve worked with several tech startups over the last several years, and for the ones I’ve worked with, here is what I have observed about what they value in an accounting system:

  • Automation
  • Flexibility
  • Collaboration
  • Scalability

The things startups value has changed over the years, and the four above are induced by the new technology driven startups that see the potential in cloud computing. They are looking to make an impact in the world through software by automating tasks that used to be very manual and cumbersome. So which accounting system fits your tech startup? Take a look below as I evaluate these four values.

Automation

I have already written a very nifty article comparing QuickBooks and Xero’s automation features that are both time savers for business owners as well as accountants. Here is a short summary.

Both Xero and QuickBooks have pretty awesome automation features that will continue to get better over time. There are a couple things that I think set Xero apart from QuickBooks in automation:

  1. Xero does a 1 step reconciliation compared to the traditional 2 step reconciliation in QuickBooks. This saves a lot of time each month.
  2. Xero has an open API that allows for custom development and much more automation because you can plug Xero into almost any application or system you are already using.

Automation Startup Winner: Xero

Flexibility

A tech startup loves to be able to have flexibility and access to information anywhere, at any time. Both QuickBooks and Xero have cloud versions of their product that allows for access from nearly any device. Aside from access, you want it to be easy to file an expense report, or record your mileage, etc. Neither QuickBooks or Xero provide a built-in scenario for that, however, add-ons are a great way to automate those processes.

Xero has a much more robust ecosystem of apps to choose from than QuickBooks.  You can check it out and see for yourself here.

Flexibility Startup Winner: Tie

Collaboration

The ability to collaborate on the same data has become a must have feature for any tech startup. Any new app coming out is made to be viewed by multiple people and updated in real-time. Both Xero and QuickBooks provide for collaboration between client and accountant. QuickBooks uses assignment and tasks within the platform to complete procedures, while Xero doesn’t have an official task system built in. Xero approaches the collaboration a bit differently by allowing users to leave notes and chats on transactions so that others can read them if needed. These can be used later for auditing and documentation purposes.

My own personal preference is that it is much nicer to have notes and comments at the transaction level because that is where I’m always interacting with my clients. It’s easy for me to just copy the link to specific page and send it over to a client so they can click the link and leave notes on the transactions I asked questions about.

Collaboration Winner: Xero

Scalability

Scalability is defined as the ability of a system, network, or process to handle a growing amount of work in a capable manner or its ability to be enlarged to accommodate that growth. Applied to accounting, you might ask the question “How long can this software continue to be a good fit for my business if we grow 100% year over year?”

Both Xero and QuickBooks can fulfill your basic accounting needs at the startup stage, but as you scale and grow, you WILL need to expand and you WILL need additional features to keep your accounting processes easy to use and simple for your employees.

My thoughts turn to the approach that QuickBooks and Xero take on their add-on communities and I see Xero providing better scalability. Currently, if you don’t like the way QuickBooks does payroll and time tracking, you are stuck. But with Xero’s community, you have several software vendors to choose from that provide that feature that you need.

The add-on community fosters competition, and in the long run it produces better products. So if you are going to be scaling your business rapidly, I’d recommend Xero because of their large community of add-ons that allows you to automate tasks that you wouldn’t be able to with QuickBooks.

Scalability Winner: Xero

Conclusion

If you are reading this article looking for an alternative to QuickBooks, and you see yourself as a tech startup that values the things I discussed above, then I think it’s a pretty clear decision on which software to choose.

For my own part, as an accounting firm startup, Xero’s accounting and add-ons have done wonders for my firm to keep my admin costs down and automate tasks that I would have had to do manually.

Overall Winner: Xero

Now over to you. Do you have any questions or comments? Do you have any favorite features in either platform that you just could not live without? Please leave them in the comments below. Would love your feedback.


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