Back in February, I posted a blog comparing Xero with QuickBooks Online (QBO) but change occurs rapidly in the cloud and although much of what I wrote back then still holds true, in the intervening eight months both have brought out new functionality, Xero has consolidated its position as the vendor with the fastest growing number of customers in Australia and Intuit has signalled that it is seriously accepting incumbent challenges by releasing its new user interface.
Last week I reviewed the new QBO user interface (currently code name Harmony) which has dramatically improved the look and feel of the product and catapulted it from the dreary and difficult to the interesting and useable. I do still prefer the Xero user interface – OK it doesn’t have the plethora of colours we see with QBO and I can access functions in QBO more quickly and easily than in Xero but I like the way Xero effectively uses the real estate on the screen to present maximum information without being cluttered.
The user interface is important but is generally not the make or break factor when deciding what accounting software to use. Following is an update on key functionality differences between the two products followed by an outline of non-essential features that could add weight to the decision making process.
Major Functionality: What’s in and what’s not?
Right now QBO does not have an internal payroll solution and there is no indication that this gap will be plugged in the immediate future. There are 3rd party products that do integrate into QBO which is helpful, but if payroll is a requirement, generally the choice would be for the fully integrated option.
Xero also has fixed asset module which can manage basic registers, depreciation and sale/disposal of assets. There has been a lot of simplification of depreciation rules from the ATO in recent years so that for the many small businesses that just need some basic asset tracking/management this is a viable alternative.
However Xero does have a more extensive list of missing major functionality: Purchase Orders, Sales Orders, and Inventory. Xero has frequently acknowledged that these are holes in its core accounting function and has promised to fill them in but it is only fairly recently that there has been a firm commitment and evidence that the modules are on the drawing board rather than the wishlist. Hopefully within the next twelve months we will see a turn around here.
And the not so Major factors
My Xero Likes:
- GST/BAS – I not only have the full calculations worksheet and the BAS form but also a GST Reconciliation report – great for identifying prior period adjustments etc.
- The customisable Account Watchlist on the dashboard – I use this to show PAYG Withheld, Superannuation Liability and Accounts Payable to enable clients to get an complete picture of their expected cash position.
- Overview of Bank Accounts on the dashboard – Clients can clearly see where the status with regards to reconciliations as well as balances.
- And I still love those Bank Rules which are so flexible and comprehensive.
- I can open additional functions or reports in a New Tab (this is only available in the Accountant version of QBO) – incredibly useful for multi tasking.
- Processing Superannuation payments using Auto Super – how much time do small businesses spend on administering superannuation and they still don’t get it correct.
- The Employee Portal for lodging leave requests, printing payslips – self service streamlines the administration processes.
- Direct lodgement of TFNs with ATO – again streamlines administrative tasks.
- So many 3rd party products that integrate to Xero via Open APIs.
My QuickBooks Online Likes:
- Report customisation – empowers the user to easily customise reports specific to their business needs.
- Billable expenses – very helpful where you need to on-bill expenses.
- Sub accounts in the Chart of Accounts – makes longer P&L reports so much easier to read.
- Custom fields for customers and suppliers – great for recording business specific extra data relating to customers and/or suppliers.
- Recurring or repeating general journals – loved by accountants.
My Xero Dislikes:
- Super clunky and error prone posting of Payroll into the financial accounts.
My QBO Dislikes:
- Can’t put default tax codes on chart of accounts – this functionality can save so many data entry errors.
- Sub category required on all accounts in the Chart of Accounts – it is confusing to users, not used anywhere but is so deeply embedded in legacy code that it can’t be removed.
Yet having said all that – the not so major points are unlikely to substantially affect the decision making process but depending on requirements the absence or otherwise of some of the major functions could impact the decision. Other factors that could impact the decision are:
- Price – Xero has demonstrated through its more expensive pricing plans, that customers are not necessarily particularly price conscious.
- Referrals/Recommendations – here Xero currently has the edge having marketed extensively to accountants over the last couple of years and these accountants are busy on-selling to their clients.
- Marketing – having consolidated its base, Xero is now embarking on above the line marketing meaning that advertising bill boards are appearing in your local shopping centres and at bus stops right now, increasing brand awareness.
So whilst there are some differentiating features in software functionality, Xero is adding more customers, more quickly in Australia right now predominantly, because of the relationships it has nurtured with accountants and possibly from its new advertising campaign. Intuit is going to have to do something innovative to level the playing field in this respect if it is to win the hearts and wallets of Australian small businesses. During my recent visit to the Intuit Accountants Summit in the US, I did ask what tactics the company was going to use to both expand its position in Australia and take on Xero but didn’t receive any clear indications. What is certain is that Intuit is in Australia for the long haul and will use its corporate muscle to carve out a slice of the pie – we just need to wait for a bit longer as the jockeying will continue.