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Welcome to part 3 of our comparison series between Freshbooks, Xero and Quickbooks. Feel free to view Part 2: DesignNow on to Automation.

This is perhaps my favorite feature to evaluate of all the rest.

Automation is the reason I was an early adopter of the cloud, and is the primary reason I moved to cloud accounting software, because it helps eliminate a lot of what is the most annoying aspect of desktop software, that being double entry.

To evaluate automation between the platforms, I chose three basic tasks that small businesses do most often in their accounting system:

  1. Expense Classification
  2. Bank Reconciliation
  3. Invoice & Bill Creation

So what is the best cloud accounting software for small business when it comes to automation? Let’s see how our contestants stack up in each category below!


Expense Classification

Freshbooks allows you to automatically connect to your bank accounts and import expenses. I walked through this process with my credit card and found it very easy to connect up. The transactions imported within a couple minutes and I was brought to the screen below to categorize the imported expenses.

The big downside for me, is that there is no way to create rules or set up expenses to automatically categorize.


Bank Reconciliation

To be fair, Freshbooks didn’t begin as a full accounting system, and it still isn’t there, so we aren’t necessarily evaluating their strength here. Freshbooks however, excels on the invoicing options, but for bank reconciliation, unfortunately, it doesn’t yet exist in their system.

Invoice & Bill Creation

Freshbooks excels in their invoice and bill creation as well as delivery.

Freshbooks began as an invoicing platform and has slowly built from the popularity they created into an accounting system. They definitely have their invoicing down right. To evaluate this I’ll go through what I think are their best invoicing features.

Freshbooks allows you to hover your mouse over invoices and select to copy, edit, or send and invoice with one click:


They also offer some standard options you’ll need to use with your invoices, such as setting up automatic recurring invoices (I love this option), payments received from customers, and credits.


Another great automation feature Freshbooks offers is billable expenses. Any expenses you have coming in through your bank import can be rebilled to your clients with just a couple clicks.


Another feature I like about Freshbooks is the payment options you can offer your customers. They can pay via paypal e-check, or a host of other credit card processors such as This allows you to have some control over your payment processing fees.


For the automation features Freshbooks offers, they do a fantastic job. Their invoicing and billable expenses are superb. However, their lack of bank reconciliation and accounts payable invoices features, make a challenging case as a worthy contender for small business.


Expense Classification

Xero allows users to connect their bank accounts into Xero to pull in both deposits and expenses.

Once expenses are inside Xero, there are a variety of options to classify the expense automatically. Perhaps the most time-saving option is to set up bank rules. I have posted a sample bank rule below. Basically, you can select any field imported from the bank and run rules on it to automatically classify and reconcile. Check out the link for other customization options, it’s a huge time saver.


Another good automation feature of Xero is the ability to easily match bills already created to expenses coming in through the bank account. For example, if I purchase a printer cartridge at office depot and snap a picture of the receipt, I can send it to Xero, or use a third party app to send it to Xero as an invoice, and it will automatically match itself to the expense coming through the bank account with the receipt attached. No manual entry required. It’s Magic!



Bank Reconciliation

Xero has uniquely integrated their bank reconciliation process in with their expense categorization and deposit matching process. For most small businesses, you don’t have to worry about doing a separate bank reconciliation. As soon as all the items are classified in your bank account, your reconciliation is complete!

Invoice & Bill Creation

Xero approaches bills and sales invoice creation basically the same. They offer recurring invoices/bills, invoices/bills paid, copy of existing invoices/bills, credits, and sending via email.



Here are the options for an individual invoice or bill.


Xero allows you to integrate with a few different gateways, including paypal and stripe, to make it easy to receive payments from customers.


For most small businesses, the expense classification and reconciliation processes in Xero will not only save a significant amount of time, but will get you through one of the normally taxing aspects of accounting without too much pain.

Unfortunately, Xero is lacking the billable expense feature still, so if this is a “must have” option then you may want to look at an add-on or another system.


Expense Classification

Quickbooks allows their users to pull in bank statement information directly from banks, including deposits and expenses. Quickbooks recently updated their cloud product and introduced bank rules in October 2014, and a good review of it can be found by our friends at the Sleeter Group here.

Below, you can see the rule screen. It’s not quite as customizable as Xero’s, (such as allocating expense by %), but it covers most rules a small business owner might use.


Quickbooks also allows users to match up invoices or bills to their expenses or deposits to aid in the reconciliation process.


Bank Reconciliation

Quickbooks has maintained a separate reconciliation process in their online software similar to the desktop version. To do the bank reconciliation, you pull your bank statement and enter in the ending balance into Quickbooks. You will then need to go through and tick the expenses on the bank statement to show that they cleared the bank account.

While the actual reconciliation isn’t automated, the automation of the bank feeds and bank rules should make the reconciliation process much more painless than it used to be.

Invoice & Bill Creation

Quickbooks has separate screens for invoice and bill creation with straight forward menus and some of the same features you’ll see in Xero and Freshbooks, namely: payments, credits, bills, and invoices. However, you will also see a few more options that are valuable, including time billing and delayed charges.

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Quickbooks also offers to receive payments from customers using their own payment network so you can make it easy for your customers to pay you.


Quickbooks does a great job with their bank rules and invoice and billing features. The bank reconciliation, in my opinion, can be automated better, but for most small businesses the bank rules and invoice creation/payments should be a large time saver.

Conclusion on Automation: Freshbooks vs Xero vs Quickbooks

Alright, here are the winners for the three features evaluated when it comes to automation.

Expense Classification Winner: Xero

Xero has better bank rules and customization than Quickbooks, while Freshbooks doesn’t offer it at all. The bank feeds operate well enough, and the expense matching and categorization is intuitive and easy.

Bank Reconciliation Winner: Xero

While Quickbooks has done a great job automating the features around bank reconciliation, they have stuck with the old tick the box process. Xero is ahead in this area by integrating their bank reconciliation directly into their expense and deposit classification. No need to go through and review your bank statement!

Invoice & Bill Creation: No Clear Winner, Nudge to Freshbooks

Each system appears to show advantages and disadvantages. Freshbooks would take the cake if they only had billing capabilities, because they rock in invoicing and billable expenses. As it is however, there is no clear winner here.

Overall Winner For Automation: Xero

That’s it for our automation review.

Stay tuned for our next comparison between the platforms, as we will comparing the eco-systems (add-ons & apps) capabilities of Quickbooks, Xero and Freshbooks.

Also, feel free to review the rest of the series: