Xero Online Accounting Software Is Definitely a Little Better Than QuickBooks

Sam Glover for TheLawyerist.com writes: After in-depth testing and hands-on assistance from Xero, I can report that Xero is definitely a little better than QuickBooks. If you are in the market for accounting software, and would like something that is better than QuickBooks in several ways, worse in several others, and a bit better overall, then I recommend Xero.

That is obviously not a ringing endorsement, and I went back and forth many times before settling on it. But it is fair.

By way of background, I have been using QuickBooks for my accounting (for my firm and for Lawyerist) for years, but I have never loved it. We moved Lawyerist’s accounts to QuickBooks Online at the beginning of 2013, but I love that even less. It takes the clunky QuickBooks UI and makes it slower and even clunkier. I have been on the lookout for something else every since then, and I have tried a bunch of small-business accounting packages.

After all that, I finally have Lawyerist set up on Xero (pending my accountant’s attention to a short list of stuff I couldn’t figure out how to do properly). I have been using (and paying for) Xero since the beginning of the year, and on balance, I am happy with it — and even happier to be leaving QuickBooks behind.

What I Like About Xero

Xero is pretty good-looking online software, similar to something like Clio or Basecamp or Freshbooks. Maybe looks should not matter, but I find that they do matter quite a lot when it comes to the way I feel about software. If nothing else, it starts my relationship with the software off on a good footing.

What I like best about Xero, however, is the way it integrates with lots of payment systems. If you want to accept credit cards, QuickBooks will only play nice with Intuit’s own payment solutions. For everything else, you are in for a lot of manual accounting. Xero, by contrast, integrates with a long list of payment providers. We use PayPal and Stripe, for example. The PayPal integration is the best I’ve seen, and although the Stripe integration could do a better job of accounting for transaction fees, it saves me a ton of time.

Speaking of saving time, reconciling transactions in Xero is a piece of cake, largely because of those bank and merchant account integrations. With QuickBooks, I used to spend most of a day reconciling accounts and generating reports each month. With Xero, I can do it all in about 15 minutes. Most transactions are as simple as clicking OK because Xero has recognized the transaction and matched it to the appropriate vendor and account. With Stripe transactions, I have to manually add the transaction fee, which gets onerous if I do a month of credit card transactions all at once, but I had to do them manually with QuickBooks, too, plus PayPal transaction fees.

And while I am about to get really fired up about Xero’s unintuitive UI quirks in the next part of this post, Xero is pretty easy to use overall once you get it set up learn to deal with its often-unintuitive UI. The day-to-day easy of use plus the massive time savings is why we are now a paying customer.

What I Don’t Like About Xero

Although I like the way Xero looks, I don’t understand much of what I am looking at. For example, when I log into my accounting software, it is usually because I want to record a transaction. Xero requires at least two clicks to do this, and neither of them are intuitive. The fastest way to record a check or credit-card charge, for example, is to go to the dashboard and find the account from which you spent the money, then click on Manage Account (huh?), then select Spend Money. The screen you arrive at does not convey in any way that it will record a transaction. The most-prominent thing is a button labeled Direct Payment. I don’t know what that means, but if you fill out the thing that looks like an invoice that requires you to itemize everything as you would on an invoice, you will wind up with a transaction that resembles the transaction you wanted to record.

Xero is full of these clunky UI features, but they mostly work fine once you get past the fact that what you see on the screen only sort of resembles what you are trying to do. This is more or less the same as QuickBooks, which still insists on using the check metaphor for spending money from cash accounts, even though you probably aren’t using a check for most of those transactions.

Speaking of checks, while QuickBooks is stuck on them, Xero refuses to acknowledge their existence. It only acknowledges payments when they are deposited into your account. There is no way to keep track of undeposited checks (which represent income whether or not you have deposited them in your bank account) without clunky workarounds.

A minor but pervasive annoyance is Xero’s obsession with tax rates. This apparently has something to do with differences between the way taxes are handled in Europe and the US, but I don’t understand it. All I know is I am supposed to assign a tax rate to virtually every number I enter into Xero, even though I have no reason to assign a tax rate to any of them.

One last thing. Unlike QuickBooks, there is no option when spending money to mark a transaction as billable to a client. This was a really convenient feature of QuickBooks that I would miss if I were using Xero for my law practice (as opposed to for Lawyerist, where this almost never comes up).

Trust Accounting in Xero

Like QuickBooks, Xero does not have any special trust accounting features, but it does trust accounting just fine if you have a basic understanding of double-entry accounting.

It does handle advance payments quite well, though I don’t think you could use this feature to satisfy your trust-accounting requirements.

Moving from QuickBooks to Xero

There are two approaches to software openness. Let’s call one the open approach. The logic is that the easier you make it for people to take their data and leave, the better you must be to make them stay. See, for example, Google Takeout, which lets you take nearly all your Google data and take it anywhere you like.

Let’s call the other model the closed approach. This approach is used by software that is not very good, based (I assume) on the vendor’s knowledge that you would leave if you could. This is Intuit’s approach to QuickBooks.

Which means that moving from QuickBooks to Xero requires a 14-page instruction manual. This is not all Intuit’s fault, actually. QuickBooks does have a number of ways to get data into and out of it so that it can cooperate with other software. So I assume it must be possible to design an importer. Xero has not done this. Xero has provided a 14-page manual that involves things like copying and pasting data in a spreadsheet and manually annotating it so that Xero can read it.

My first try ended in failure. The instructions do not cover QuickBooks Online, so I exported all my data from QuickBooks Online to the desktop version, which required me to use Internet Explorer for some reason and wait around a lot while large files downloaded or converted.

This was just for the chart of accounts, mind you. I think. I think I followed the directions correctly, but when I tried importing the new chart of accounts into Xero, I got a slew of errors, and after wrestling with it for a couple more hours, I gave up. I didn’t even try to import the transactions, which would have been useless without a proper chart of accounts in any case.

Until Xero gets its act together on QuickBooks importing, there is only one way to use Xero: starting fresh. For most companies — including law firms — this means you probably only want to choose Xero when you start your firm, or maybe on January 1st. Switching from QuickBooks later on is just too painful.

Support

I needed a lot of help getting set up with Xero. I think I’m a competent bookkeeper, but I’m definitely not advanced, so I had a lot of questions about Xero’s different way of handling some things. Unfortunately, there is no way to just call Xero for support. You just have to submit a form and wait (a while) for a response. (I did actually get some phone help from a Xero representative, but I think I was getting special treatment.)

Ordinarily, I don’t mind this approach. I don’t really like talking on the phone to customer support representatives (Freshbooks and Ruby Receptionists being notable exceptions). But Xero’s turnaround time on its support tickets is “as soon as possible, no later than the end of the next working day.” That is reasonable, but it feels pretty slow when you are in the middle of wrestling with an accounting problem.

Even QuickBooks lets you contact a real person. Someone recently spent 45 minutes on the phone with my accountant to iron out a problem with her access to our accounts. (The fact that it took 45 minutes to figure out how to fix her login says something unfavorable about QuickBooks, of course.) Xero does not even offer the option.

Conclusion

Look, software development is really hard, especially software as complex as accounting software. But Xero started with a blank slate on one hand, and a lot of weak competition on the other, and this is the best it could do? I am disappointed. But Xero one of the few realistic options for small-business (and small-firm) accounting, and it is a little better than the others I have tried.¹

However, my company is also a paying customer, and on balance, I am pretty happy we switched to Xero. Even though I obviously don’t like everything about Xero, it makes my life easier in important ways.

Summary

If you are in the market for accounting software, and would like something that is better than QuickBooks in several ways, worse in several others, and a bit better overall, then I recommend Xero.

Rating: 3 (out of 5)

You can follow the author Sam Glover on Twitter by Clicking Here. Sam Glover has been writing about law practice technology, management, marketing, and other stuff on Lawyerist since 2007. He also consults on appeals and motion practice. When he isn't blogging or lawyering,