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QuickBooks Online (QBO) poised to take on Xero in the cloud

I posted a couple of blogs last year about a new entrant in the Australian cloud accounting space – QuickBooks Online (QBO) from Intuit, the original US developers of QuickBooks. What makes the advent of this product so interesting is the determination of Intuit to penetrate the Australian marketplace and seems to have an almost bottomless pot of money to do so. Large amounts have been poured into both marketing and product development. Last week, senior management was back in Australia for the third time in about six months conducting a series of workshops in most major cities, showcasing the product and specifically their recent developments, to industry professionals.

I haven’t really worked out why Intuit is focusing so heavily on the Australian marketplace. I wouldn’t have thought it was large enough to warrant an investment of the size they are allocating. Their figures are that there are more than 2 million small businesses in Australia, which represents 50% of the workforce and 1/3rd of GDP and that this represents a business opportunity for them.

I remain unconvinced because I believe QBO is most suited to the micro end of the small business market and their target market is much smaller. Additionally many small businesses select their software based on their accountant’s recommendations who in turn prefer their clients use software that they are both familiar with and that will integrate with their practice management software. Other small businesses base their decision on recommendations from friends, colleagues or family, or software they have previously used. Right now on those criteria, QBO would not rate highly on many radar screens. However Intuit is using all weapons in its arsenal to increase brand and product awareness, most Google searches bring QBO up way ahead of Reckon’s QuickBooks, Intuit is out there on social media and its free certification programme all assist in this.

Based on the current functionality of QBO, I would see that it would be positioned mainly as a competitor to Xero customers and prospects. So what does it have going for it?

When Intuit first came to Australia, they received feedback that both Payroll and Inventory solutions in the product were necessary. In a relatively short space of time they have leapfrogged over Xero and have basic Inventory functionality embedded. Payroll has been added but it is at the stage Xero was this time last year – a separate web-based product that does pass journal entries directly into QBO – nice but not as good as Xero as there are separate products and additional licensing costs (unless you only have 1 employee when it is free).

Other pluses for QBO:

  • You can do Quotes/Estimates and Sales Orders. You can raise multiple invoices from one quote. A fairly common requirement that is not yet in Xero.
  • The report customisation feature that is a strong feature of QuickBooks is available in QBO. I have always found Xero to be very light on in reporting capabilities.
  • QBO has both Locations and Classes for additional analysis. Locations are similar to Xero’s Tracking Categories and Classes are used for Job Costing – there is no similar functionality in Xero. However Xero does allow you to assign up to 5 Tracking Categories per transaction – so this could be an equal.
  • QBO does have more comprehensive budgeting functionality, but budgeting is a process so few micro businesses do, so I don’t rate this too highly.
  • QBO has separate tabs for Customers, Suppliers, Banking etc so options within each centre are visible from the Home page and there is one less click to get to an option. Xero lumps everything under Accounts so options are less visible immediately.

But: (i.e. the things I don’t like or where Xero has a heads up)

  • The layout of the Customer/Sales page in QBO is different from that of the Suppliers/Purchases page – consistency is really important especially during the learning phase.
  •  Each account in the chart of accounts as well as being assigned to a main class such as Income, Expense, Current Asset is assigned to a sub class which has no relevance anywhere – an extra and confusing step for the micro business owner.
  • Only the Accountant’s version has the ability to open a menu option in a new tab and thus have a report and an entry form open at the same time. This is a major let down.
  • Neither product is particularly strong in managing GST and producing the BAS and both are looking at enhancements so I will reserve judgement here.

However the coup d’état for Xero is its bank rules that so comprehensively, seamlessly and effectively remove a lot of the hack work of data entry for the micro business owner (and reduces errors). For me that has been the clincher for many a recommendation in the micro business space. QBO really doesn’t compare here.

Overall from a functionality perspective, the two compare reasonably evenly. Although functionality is the most important factor in software selection, other factors should be considered including:

  • Support – I haven’t tried contacting Intuit support so cannot compare but I have always been favourably impressed with Xero.
  • Price – QBO is way cheaper than Xero – virtually 50% especially with the price decrease that came into effect this week. As this fee is paid monthly, over a period of time, this does add up, however I very rarely make a software recommendation based solely on price. If the software doesn’t fit the business needs, the cost in extra time and extra processes can more than wipe out licensing costs.
  • Community acceptance – there is no need t be a guinea pig, there are tried and tested solutions that work – right at the moment this remains a deal breaker for me. There are too few businesses using QBO in Australia, I would have to have a compelling reason to select the product over Xero which does have a huge installed base which confirms it is a good product and means that there are many accountants, bookkeepers and consultants available to support users.

Right now, I am still hesitant to recommend QBO to a client even in the situation where the client needs functionality such as sales orders that are not in Xero and otherwise fits the QBO model. Over time as the newness gets ironed out, I expect this will change. Meanwhile it’s a case of watching to see how well Intuit swims in the Australian market place.

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2 comments on “QuickBooks Online (QBO) poised to take on Xero in the cloud

  1. […] in February, I posted a blog comparing Xero with QuickBooks Online (QBO) but change occurs rapidly in the cloud and although […]

  2. […] in February, I compared Xero with QuickBooks Online  but change occurs rapidly in the cloud. In the past eight months both have brought out new […]

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