Welcome to part 5 of our comparison series between Freshbooks, Xero and Quickbooks. Feel free to view Part 4: Add-ons. Now on to Reconciliation.
Entrepreneurs never seem to get around to this part of their books, mainly because it’s been traditionally a complicated and a strictly manual process. Ticking boxes and highlighting transactions on a printed out bank statement has never been at the top of an entrepreneur’s priority list. (I’m sure it is on some accountant’s lists though)
The point of evaluating this feature of accounting systems is to see where the accounting software is at with this traditionally manual process, and see if it’s become more manageable. To be fair, we covered this at a high level already in the automation section, but this post will vet out all the nuances in each system and provide a winner.
The Features Evaluated For This Post
- Bank Feeds
- The Reconciliation
Freshbooks brings in all your expense transactions via a bank feed, and is accessed by entering your online banking username and password. Deposits however, are not downloaded in the feed. From there Freshbooks allows you to classify your transactions to an expense category.
At this time. Freshbooks doesn’t have any way to reconcile your transactions to a bank statement. Freshbooks appears to be leaning towards a “2 Step Reconciliation” by looking at the way they are currently set up. For now though, Freshbooks is missing the step where the system transactions are matched up to the bank statement.
Xero utilizes Yodlee feeds, in most cases, to supply transactions from your bank into Xero, and for most banks I’ve worked with it’s a very reliable feed. Xero pulls these transactions into a “reconcile” screen, and from there you can do whatever you’d like with it:
- code as an expense or revenue
- match to an invoice or bill
- leave notes for someone else to see
- attach a document
- or mark it as a transfer
The beauty here is that Xero keeps track of your “statement balance” as well as your “balance in Xero”. The statement balance should match to your bank balance as long as all transactions are imported correctly.
Xero doesn’t require any additional steps. If your statement balance matches your bank balance on the given date, then simply reconcile the transactions in your bank account and you are done. As a Xero accounting firm, this “1 step” reconciliation process is one of the top reasons why we use Xero as it saves us countless hours reviewing bank statements and researching transactions.
Quickbooks Online typically brings in bank transactions through their own feeds that they’ve had established for quite some time now. From my experience, they are similar in reliability to Xero bank feeds, and Quickbooks allows you to categorize the transactions and match them to invoices and bills similar to Xero.
When all of the imported transactions are matched or coded, then you are ready to do the reconciliation.
Quickbooks uses the traditional “2 step reconciliation” process. This means that after the transactions are coded, a reconciliation to the bank statement for each transaction must be performed. Quickbooks makes this as quick as can be for a reconciliation, but after using Xero, this 2nd step just seems unnecessary and tedious.
As an accounting firm that uses both Quickbooks and Xero, we save countless hours from using Xero’s one step reconciliation. Bank feeds are helpful in all three systems to automate the reconciliation process, but Xero takes it one step further by eliminating the traditional and time consuming 2 step reconciliation process.
I highly recommend that this post be reviewed in conjunction with our “Automation” review of Freshbooks vs Xero vs Quickbooks, as both posts are helpful in choosing a cloud accounting software for small business.
That’s it for our reconciliation review.
Stay tuned for our next comparison between the platforms, as we will comparing the invoicing & payments capabilities of Quickbooks, Xero and Freshbooks.
Also, feel free to review the rest of the series:
- Part 1: The Criteria
- Part 2: Design
- Part 3: Automation
- Part 4: Eco-system (add-ons & apps)
- Part 6: Invoicing & payments
- Part 7: Collaboration (Coming Soon)
- Part 8: Reporting (Coming Soon)