If you’re running a small business in Canada and looking for cloud-based accounting software with a full range of features, you will probably end up looking at Xero vs QuickBooks Online.
Which one is best option for your business, Xero vs QuickBooks Online? Both cloud accounting options offer very similar features, but they are not the same. The difference is in the details.
New Zealand based Xero has been giving QuickBooks a run for its money since 2006. It has complex accounting features, 700+ integrations and a new project management feature. Like QuickBooks Online, it’s also a cloud-based service optimized for small to medium-sized businesses. Unfortunately, it is not localized for Canadian small businesses and is priced and billed in U.S. Dollars, with fluctuating billing values due to exchange rate changes.
Developed in 2004, QuickBooks by United States’ Intuit has advanced accounting features, invoicing, 600+ integrations and a lending feature. It is acclaimed by accountants and bookkeepers and is localized for Canadian small businesses. Intuit has been in Canada for over 30 years. While QuickBooks is Intuit’s desktop accounting software, QuickBooks Online is the cloud-based service. For the Online version, you pay a monthly subscription, instead of an upfront fee, with all the patches and software updates included. It is priced and billed in Canadian Dollars with no changes in billing due to fluctuating exchange rates.
Why choose a cloud accounting software?
You will always be up-to-date! Gone are the old days of downloading software and upgrading with every new release. Now, you just subscribe and immediately have access to the latest version. Your data is automatically synced across your devices so you can access it from anywhere. If you’re curious about free cloud accounting software, click over to our article Wave Accounting, Can I Do It Myself?
A comparison of specific features, Xero vs QuickBooks Online:
Both Xero and QuickBooks Online offer monthly subscription pricing tiers to choose from depending on which features your business needs. Both options include plans that are affordable for small businesses. QuickBooks Online is the best choice if you only need the very basics as a freelance sole proprietor who files a T1. Want simple software that will help you to track income and expenses and calculate quarterly tax payments? The QuickBooks Self Employed plan is only $10CAD a month and comes with much more functionality than Xero’s Starter plan ($20CAD/mo), including tracking income and expenses, invoicing and accepting payments, as well as capturing and organizing receipts. QuickBooks’ most basic small business plan, EasyStart, is only a few dollars more per month, allows the user to run reports and has the option to add-on payroll.
Once your small business needs multiple users and the ability to manage bills and record payments, the plan prices are very similar with the highest tier going for $40CAD per month. At this point in your company’s growth, where you’ve got multiple users, we suggest you hire a bookkeeper to record your business’ daily transactions, including receipts, purchases, sales, and payments who uses cloud accounting software. A benefit of using a bookkeeping firm is that they will already have accounting software, so you will not need to subscribe on your own.
QuickBooks Online is easy to use once you already know the software. There is a steep learning curve and setup can be quite intensive. With Xero, setting up the software is easy and the software is intuitive. It is much easier for someone who has no accounting/bookkeeping background. If you can handle simple bookkeeping tasks — like inputting expenses, sending invoices, and making payments — you could potentially save on bookkeeping and still have the accountant’s expertise for taxes and other tasks.
Managing Accounts Receivable
Both Xero and QuickBooks Online have strong accounts receivable components. They each allow you to create custom invoices, email invoices to customers, accept online payments, and run detailed accounts receivable aging reports to stay on top of unpaid invoices.
QuickBooks Online offers invoicing with multiple templates as well as built-in packing slips. Xero has finally brought in the option to customize the look of your invoice. Until recently, it only has one invoice template. Unfortunately, Xero’s packing slip and invoice template is still 2 pages, generated together. If you only want to print a packing slip, you have to delete the content on the 1st page, which is a slightly annoying extra step.
Managing Accounts Payable
Xero includes accounts payable features in all three of their plans. Unfortunately, you cannot easily view the sales tax you owe, as reports are not localized for Canadian customers.
QuickBooks Online does not include the option to manage your bills with the cheap EasyStart plan, although it is included in the Essentials and Plus plans. With the accounts payable component, you can track and pay bills online or via cheque, as well as stay on top of what you owe suppliers by generating a detailed accounts payable aging report. QuickBooks does include a localized Sales Tax Centre pre-configured to track and report sales tax payable.
Bank & Credit Card Integration
Both Xero and QuickBooks Online can connect to your bank and credit card accounts so your transactions automatically download into the software. Unfortunately, with Xero it’s not a seamless transition. Many Canadian customers complain that Xero does not automatically import bank statements, that they must upload (manually import) bank statements into Xero themselves. Xero gives the option to precode a CSV bank statement, so that it automatically reconciles when you import it. With QuickBooks Online, it’s very easy to connect your bank account, the feature most important for bookkeeping. It takes only a few minutes to connect.
Xero allows you to keep track of the products that you sell using its inbuilt functionality or by connecting to a dedicated inventory app. However with QuickBooks Online, this feature is only available in the top tier Plus plan. The inventory tracking components includes creating purchase orders, updating all quantities and costs when purchasing goods, and tracking cost of goods sold when sales are made.
Giving User Access
All three of Xero’s plans allow you to give unlimited users access to your data. This is another option that QuickBooks Online does not include in the thrifty EasyStart plan, although it is included in the Essentials and Plus plans. QuickBooks Online Essentials allows you to give up to three users access, and QuickBooks Online Plus allows you to give five + users access.
Both cloud accounting options include a mobile app (Xero Touch and QuickBooks Online Mobile) that integrates well with third-party apps, so you can do less entry and automate simple tasks. Xero’s app shop and QuickBooks’ app store include many of the same options, including popular apps like Shopify, PayPal, and Unleashed.
Budgeting & Forecasting
Xero includes budgeting, but not forecasting in their pricing plans. To forecast, users must export the Cash Summary report into Microsoft Excel to create a simple cash flow forecast. QuickBooks Online only includes this feature in the top tier plan, QuickBooks Online Plus. This feature allows you to create income and expense budgets as well as create budgets for a specific customer or job.
Xero does not offer Payroll to Canadian customers and has no intentions of setting up an integrated payroll to date. This component has only been released to the United Kingdom, New Zealand, Australia and the United States. There are three main cloud software options that specialize in Canadian payroll and integrate with Xero: Payment Evolution, SimplyPay and Wagepoint. For Wagepoint, the cost per pay run is $20CAD base fee + $2 per employee.
QuickBooks Online has its own payroll processing option for Canadians that integrates flawlessly. To turn on Standard Payroll, you must pay an additional fee of $20CAD per month plus $2 per employee per month. You can then pay employees with direct deposit at no extra cost and automatically calculate taxes to keep your payroll accurate on each run.
For Advanced Payroll, there is the $20CAD per month fee plus $2 per employee per pay run (the same cost as Wagepoint). Your payroll taxes will be automatically filed and remitted every time they are due. Your employees will be able to update their info, view their pay stubs and tax forms. Preparing and filing year-end forms, like T4’s and T4A’s are taken care of, as well as Records of Employment when employees leave.
Small Business Lending
Both Xero and QuickBooks understand the need to provide lending solutions to their small business customers. Xero works with financial institutions to offer a range of lending solutions including term loans, lines of credit, invoice advances and invoice installment plans.
QuickBooks has developed its own lending service called QuickBooks Capital, powered by AI. This is not a referral service that connects businesses with lenders; QuickBooks is lending its own money.
Typically, small business lenders have to make their decision based on a very small amount of data. They keep their risks low by not lending to young companies, although they are exactly the kind of businesses that would really benefit from a small loan to expand, buy in bulk and bring on new customers.
Intuit’s lending service is powered by its own machine learning models, which it trained by feeding it (nameless) data from its existing QuickBooks user base. This allows Intuit to get a full picture of the financial state of a small business and the ability to predict that company’s future cash flow and ability to pay back a loan.
Customer Support Options
Xero’s customer support includes the Xero 101 video series and robust help center called Xero Central. The Learning section has courses and live events, and in the Support section you can search How To articles and discussions. Xero does not have the option to speak to a real, live person.
QuickBooks Online offers live customer support via phone or online chat in all of their pricing plans at no additional charge. Chat online with a support agent by logging into your account and clicking on the Help option. If you prefer phone, customer service representatives for Canada are available Monday-Friday, 9am to 8pm, ET. If you don’t mind doing a little research, you can check out the QuickBooks Support page. There you can use keywords to search for something specific or browse hundreds of help articles on every topic. You can also watch step-by-step tutorials to learn all the QuickBooks tips and tricks. Or, post questions, find answers, and chat with other users and QuickBooks experts in the Community Q&A. You can also reserve a space for an upcoming Webinar. These sessions can help you get started on the features and functions and teach you how to get the most out of QuickBooks.
So…Xero vs QuickBooks Online in 2019?
If you are looking for accounting software that you can set up on your own, go with QuickBooks Online, as all plans include live phone and online chat support. It beats Xero hands down when it comes to customer service and its large North American ecosystem, which makes it very easy to find a bookkeeper and an accountant who is familiar with the software. If you own a creative business, check out our article Why Creative Businesses Should Hire a Bookkeeper.
If you want built-in seamless payroll processing options, choose QuickBooks Online.
If you prefer accounting software most Canadian accountants use, choose QuickBooks Online.
If you favour being billed in Canadian Dollars with no changes in billing due to fluctuating exchange rates, choose QuickBooks Online.
Full disclosure: We use QuickBooks at UpSide Accounting. Can you guess the reasons why?