The Pros & Cons of Xero Bookkeeping software

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Xero was established in 2006 as web-based accounting software to provide an all-in-one accounting solution to help small businesses run their business bookkeeping more effectively whilst pursuing growth. It links businesses with their reliable advisors to automate tasks like invoicing, simplify end-of-year tax filing and provide a clear financial picture of your business. One of its major selling points is that you can access Xero anywhere and anytime as long as you have a device with good wi-fi access. 

Xero has a dynamic accounting system that lets users see their transactions, cash flow, and account details. In addition, with its online bill pay feature, you can stay on top of payment processes and your bookkeeping tasks. All of these features help you keep a good relationship with your vendors.

You can also keep track of your money by reviewing and approving receipts on your phone, and it can be used with various systems, like ADP, Bill.com, and Vend. For 30 days, you can use Xero for free to see if it’s right for you.

Xero also has extensive third party financial, bank, billing and eCommerce apps and service partners with a free API that enables users to integrate with its software. Fifty thousand users are making use of Xero’s API developer tools. 

In 2011, Xero launched its Xero touch mobile app for Android and iOS enabling users to generate invoices using their smart devices. The cloud accounting software also features multiple tax rates and currencies. 

In 2021 Xero announced that they now have over 1,000 connected apps for its 2.7 million subscribers. 

Are you new to Xero but want to learn how to use the world’s number one online accounting and bookkeeping software? Maybe you are a small business owner feeling overwhelmed when trying to use Xero to do your accounts. Whatever your reasons for wanting to understand and get up to speed with Xero bookkeeping, this blog is for you!

The Positives

the positives

Access anytime, anywhere.

As long as you have good internet or wi-fi access, you can access Xero at any time, wherever you are. Therefore, it has an advantage over desktop accounting software (like GnuCash or VT Cashbook) because it automatically sends updates to your smartphone when they happen.

Simplified transactions 

It enables you to edit all purchase files instantly. Xero also provides professional, easy-to-use templates – check/uncheck the required data fields and go. Other online solutions from Xero are available if you desire something more customised.

Reduces fraud

The multiple-approval process and two-factor authentication offer more security layers. Also, restrict employee access to financial account data, limit access to inventory or goods, and create numerous sign-ins.

Automated daily bank feeds 

Another reason to love Xero is that it allows users to sync up their bank accounts to the software and set up a single bank feed with all their bank statements which automatically update in Xero. Transactions flow straight into Xero each business day. You can instantly track sales invoices and match the payments against purchases, helping you keep track of money coming in and going out, and reducing your bookkeeping admin. 

Collaboration made easy

An overview of your business’s current financial health 

Financial reporting is a significant benefit of Xero. It summarises all your activities. It also lets you build filters to tailor each report to the data you want to see.

Xero provides standard reports, including cash flow records, income statements, and balance sheets. Also, critical system data, such as spending per contact, tackling sales per item, and aged payables, are exact. Xero also lets you filter transaction history and invoice history by each client.

Collaboration made easy 

Xero also makes collaboration simple by centralising all information exchanged with your accountant. It’s a sophisticated tool that helps you and your accountant collaborate on accounts and streamline productivity.

Cloud software is always updating 

Another major advantage of Xero cloud accounting software is the continuous updates and improvements to Xero’s online platform, mobile apps, and practice tools are another key benefit. All updates are free and happen instantly via the cloud. Xero also takes customer feedback seriously, making modifications to meet all needs.

The Negatives

One of the best features that Xero offers its customers is its integration with third-party apps. The integration works like a charm as long as there are no issues with it. One of the most common issues for Xero is a broken connection with the third-party app. If you find yourself in such a situation, then know that the communication between Xero and the integrated app has been broken. This usually takes place due to two reasons:

  1. You accidentally revoked the connection within Xero
  2. Reauthorisation of the connection is required by Xero for some unknown reason. There is no way to avoid either case and, in both cases, you will find yourself struggling to solve the issue. It takes a lot of time and effort to solve such an issue, and it varies from app to app. 
Incorrectly configured auto-posting

Incorrect integration 

Integrating with a third-party app can help your organisation enhance operations, efficiency, and production, reducing admin time and increasing cash flow. However, if the integration is not done correctly, it can lead to unexpected errors and bugs that need to be fixed, which takes time. If you find yourself in this situation, employ a professional accountant with expertise in Xero to help you.

Incorrectly configured auto-posting 

Xero also includes an excellent function called auto-posting. After each day, a report of all your daily transactions (including refunds) is generated. However, if not configured properly, it may have technical limitations.

If you are experiencing trouble seeing these reports, contact your Accountant, who should be able to assist you.

Cost factor 

One of the main drawbacks of Xero’s software is its pricing packages. Compared to other market-leading software, Xero will cost you far more. Of course, it has its perks, but software like Sage 50 and QuickBooks does the job at a much lower charge. 

With QuickBooks, you will be spending £10 per month for their standard package (£1 per month extra, per person, for payroll). Xero, on the other hand, will cost you around £26 a month for its standard package, but if you want any add-ons (such as claim expenses, project management, payroll), you could be adding up to £20 per month extra on top, which is way more than Quickbooks.

Room for improvement

Room for improvement

Segregation of duties 

We believe Xero is missing out on many potential businesses by not having segregation of duties. This is a significant flaw: you cannot restrict employee access to your Xero account as they will have access to your financial records and transaction history. Xero also does not let you review other people’s edits, so you cannot correct any errors made by co-workers.

Lack of customer support call 

As customer numbers continue to grow, Xero’s turnaround times on replying to emails can now take up to 48 hours. The frustrating lack of phone support has been a longstanding gripe with customers, and there does not seem to be any short-time solution coming down the track anytime soon! This slow customer support can cause further issues. Having a customer support number to receive and solve issues is essential for any company.

Not suitable for big business 

Xero does offer unique features, but these features are only suitable for small businesses. They don’t serve more giant corporations that may execute everyday transactions. For example, a lack of job separation may work for small enterprises but can backfire on large corporations. With only 1,000 transactions per month, it’s probably best to go elsewhere. Anytime a company exceeds this threshold, Xero’s response time and report generation times tend to slow down.

In Conclusion 

Xero’s automated data entry, bank app integration, simplified invoice production, and 24/7 access have gained over customers worldwide. It has transformed accounting and finance by speeding up tedious operations. Businesses now use this extra time to grow. Those are the significant advantages.

No software is flawless, and Xero has had its share of bugs and technical issues to address. The lack of a segregation of tasks feature gives the impression that the software is still a step behind its competitors, making it less competitive.

Having expert advice and support throughout your business’s use of Xero is essential. Only qualified and efficient Xero accountants will bring your business together in one easy to navigate online platform, streamlining your workflow operations.