FreshBooks vs Xero: Accounting Software Comparison

The accounting industry is no longer what it used to be. Global digital transformation has redefined the day-to-day operations of accountants as they increasingly transition to data-driven cloud accounting platforms. Two leading solutions that have emerged in this sector are FreshBooks and Xero. This report offers an in-depth analysis of each software platform, comparing their pricing, features, pros and cons.

What is FreshBooks?

FreshBooks is an easy-to-use accounting and invoice cloud platform popular among small businesses with clients in over 160 countries. The software enables the accounting of enterprises and self-employed with a wide array of features including tax tools, visibility and reports.

What is Xero?

Xero is a cloud-based accounting software platform available to small and medium-sized businesses in over 180 countries. The company provides features and tools for businesses, accountants and bookkeepers to pay bills, claim expenses, make bank connections and more.

FreshBooks vs. Xero: Comparison table

FreshBooks and Xero pricing

FreshBooks offers four plans, all available for purchase with monthly or yearly billing. Customers receive savings when they pay for an annual plan.

The costs for FreshBooks monthly plans are:

• Lite: Starting at $19 with a maximum of five billable clients.
• Plus: The most popular plan, costing $33 per month with a  maximum of 50 billable clients.
• Premium: $60 per month with unlimited billable clients.
• Select: Designed for complex needs and carries custom pricing.

The features included with FreshBooks are dependent on the plan. Additionally, clients can acquire add-ons, such as Advanced Payments for $20 per month or Gusto Payroll. FreshBooks also offers a 30-day free trial.

In contrast, Xero offers the three following plans:

• Early: Starts at $15 per month and is designed for sole traders, new businesses, freelancers and self-employed. This plan has limitations. For example, customers can only send up to 20 invoices and enter five bills max per month.
• Growing: $42 per month, ideal for small businesses that are scaling. This plan does not limit the number of invoices or bills a company can enter.
• Established: The most advanced plan, costing $78 per month.

Xero also offers some excellent optional add-ons at good value. These include features to claim expenses for just $4 per month, technology to track projects for $7 per month and Analytics Plus — a business insights component that users can try out for free for four months. Those interested in a full trial can get access to a 30-day free option.

Features comparison: FreshBooks vs. Xero

To remain competitive and keep up with the latest technology, FreshBooks and Xero offer a wide range of features, resources and tools — some more advanced than others. In this section, we look at the main features businesses should evaluate before deciding which accounting software is a better fit.

Receive payments

FreshBooks Payments lets your customers pay directly through invoices and automatically records each payment in your account. It can accept payment via debit cards, credit cards, bank transfers, Stripe and PayPal. With FreshBooks, users can embed checkouts in websites, social media and apps. The Advanced Payments feature also allows companies to accept credit card payments in person and over the phone.

Xero also allows companies to be paid via invoice and it can also help businesses receive payments in time by automatically debiting customers’ bank accounts whenever invoices are due. Like FreshBooks, it offers debit and credit card payments, bank-to-bank payments and Apple Pay or Google Pay via Stripe. While FreshBooks’ security is based solely on the Payment Card Industry Security Standards, Xero adds an additional layer of security to its online invoices and payments system.

Bills and expense management

FreshBooks and Xero take different approaches to bills. While FreshBooks includes bills as part of its Expense dashboard, Xero has a unique centralized bill dashboard that was recently launched by the company.

Under the bills dashboard in Xero, customers can store bills in one place and see an overview of unpaid bills, expenses and purchase orders. They can also schedule payments and view bills that are in draft, waiting for approval or ready to be paid.

As previously mentioned, FreshBooks treats bills as if they were an expense.

Within the expense dashboard of FreshBooks, customers can:

• Track business expenses.
• Connect bank accounts and credit cards.
• Scan receipts with their smartphone.
• Automate expenses and categorize them with tax in mind.
• Mark business expenses as billable.
• Track project spending.

Xero’s expense management dashboard allows companies to:

• Capture costs to submit and reimburse expense claims.
• View spending.
• Take a photo of receipts and sync them to the platform.
• Monitor employee spending.
• Approve expense claims without delay.
• Get notified as soon as an expense claim is submitted.
• Review and approve expense claims with expense tracking, which displays real-time figures for expenses filtered by employee, status and expense account.

Accounting, tax and compliance

FreshBooks’ accounting features are one of its strong suits. The company integrates all accounting tools to ensure accuracy, prove compliance, prepare detailed financial reports, make informed business decisions and work efficiently with accountants.

Using FreshBooks’ accounting features, customers can:

• Organize taxes, stay compliant with regulations and make data-driven decisions.
• Manage balance sheets, general ledgers, account access and journal entries.
• Customize charts of accounts and expense categories.
• Visualize metrics without looping in the accountant.
• Automate bank reconciliation.
• Keep bills organized.

FreshBooks does not offer advanced bookkeeping features. Its users need to integrate these services using Bench Accounting.

Xero offers basic accounting features and advanced tools for bookkeepers and accountants.

The basic features for small businesses centralize accounting operations in one place. Users can see their invoices and manage their contacts and accounting online. Additionally, they can connect their bank and financials to the cloud to collaborate in real time, no matter where workers, accountants, managers and bookkeepers are.

Xero’s advanced bookkeeping features – which are not included in low-level plans – allow accountants and bookkeepers to:

• Streamline workflows.
• Automate admin tasks.
• Reap the benefits of centralization and visualization.
• Enhance collaboration with dedicated support.
• Take control of tax time.
• Manage tax preparation, filing and compliance.
• Manage work paper, workflows and queries.
• Request and store papers.
• Access Xero Cashbook or Xero Ledger.
• Manage clients, staff and queries.
• Manage practice tasks, timesheets and invoicing.
• Access free software and free training.

Payroll

A significant difference between FreshBooks and Xero is their payroll capabilities. FreshBooks does not offer built-in payroll tools, while Xero is known for its simple and effective payroll features. Customers that use FreshBooks and want to run payrolls can integrate the PEO solution Gusto – an easy-to-use payroll solution designed for small businesses.

Read more about Gusto, its features, price and what it can do in our full Gusto review.

In contrast, Xero can run payrolls without customers needing to integrate other solutions, which comes at a cost.

With Xero, users can:

• Perform simple online pay runs and straightforward recurring pay runs.
• Pay into bank accounts.
• Pay employees manually or via batch payments.
• Connect a third-party payroll app for advanced payroll features.
• Enter employees’ hours, hourly rates, taxes and deductions.
• Copy a previous pay run and make changes.
• Email or print payslips from Xero.
• Pay and get paid in over 160 currencies with multi-currency accounting.

Reporting and analytics

Both vendors offer reporting, analytics and data visualization to meet the demands of companies that wish to become data-driven.

FreshBooks takes on business intelligence analytics and reports with a friendly user interface and minimalistic simplicity. In contrast, Xero offers more in-depth BI analytics tech, but these add-ons often come with a cost.

FreshBooks’ small business reporting tools allow users to know exactly how their business is performing. Using straightforward dashboards and reports, companies benefit from accurate and valuable information. From centralized dashboards to reports like profit and loss, paid taxes and more, FreshBooks offers several reporting tools.

FreshBooks reports include:

• Color-coded breakdowns of spending.
• Summaries of most recent activity.
• Profit and loss.
• Sales tax summaries.
• Accounts aging.
• Payments collected.
• Accounting reports (general ledger, trial balance, chart of accounts).
• Expense and invoice details.
• Mobile mileage tracking and time tracking.

Xero offers BI, reports and visualizations via different hubs, dashboards and features. Users can view and manage data wherever they are. They can also track projects, manage contacts, use the Xero Hubdoc and file storage hub, or through reporting, inventory, sales and other features.

Xero also has a centralized BI analytics dashboard where users can check cash flow and financial health, and track metrics. For a fee, users who want to leverage more advanced BI analytics tools can upgrade from Xero Analytics to Analytics Plus. Xero Analytics integrates with Microsoft BI.

Xero Analytics Plus offers:

• Cash flow tracking.
• Centralized business metrics overview.
• Financial health visualization.
• Customizations and predictions.
• Bank balance projections.
• Bills and invoice impact.
• Financial performance snapshots and metrics at a glance.
• AI-powered predictive analytics that can forecast up to 90 days into the future.
• Simulations to manage future events with basic scenario planning.

Support

Xero offers 24/7 support for its customers, while FreshBooks only provides phone and email support during office hours.

FreshBooks pros and cons

FreshBooks Pros

• Modern and easy-to-use accounting cloud platform.
• Wide range of features.
• Allows integrations.
• Supports international operations in over 160 countries.
• Excellent features and value for money.
• Great platform for self-employed and small businesses.
• Very intuitive platform.
• No advanced technical skills required to use.

FreshBooks Cons

• Does not have built-in payroll, but integrates with Gusto.
• Advanced bookkeeping features not available. Integrates with Bench Accounting.
• Centralizes many accounting sectors into single dashboards. For example, bills are grouped under the expenses dashboard.
• Advanced reporting features not included.

Xero pros and cons

Xero Pros

• Integral, comprehensive accounting and booking cloud platforms.
• Excellent security.
• Includes advanced features for accountants and bookkeepers.
• Advanced technology.
• Leverages AI and predictive analytics.
• Designed for small and medium companies that are scaling.
• Can operate in over 180 countries.

Xero Cons

• More expensive than FreshBooks.
• Advanced features may require technical know-how.
• Familiarity with the platform is necessary.
• Higher learning curve for beginners.
• Advanced features are only available on the most expensive plans, or must otherwise be purchased separately as an add-on.

Methodology

To write this software comparison report, we evaluated FreshBooks and Xero by examining their official websites, resources and documentation. We also reviewed demos on vendor sites and test-drove the software when possible.

Should your organization use FreshBooks or Xero?

Software that operates in the same category and industry is often very similar. However, in the case of FreshBooks and Xero, this is not necessarily the case. While both platforms cover essential accounting operations and offer modern features like reporting and BI analysis, each caters for different business needs.

If your company is small and scaling and your accounting team does not require advanced features, FreshBooks is an attractive option. Its price is very competitive and the platform has excellent features.

A small company may find that FreshBooks offers more than they will ever need and is straightforward, accessible and provides a wide range of automations and reports. However, businesses should also be aware of FreshBooks’ limitations, such as the fact that payroll, bookkeeping and other functions are not built-in and instead require integration with third-party software, which will add an extra layer of cost and decentralize operations.

If your company is consolidated and has a team of highly experienced and tech-savvy accountants and bookkeepers who are already familiar with Xero, you should definitely consider it. Accountants who use Xero have a preference for this software for good reason: The platform possesses incredibly powerful accounting features and goes the extra mile when it comes to reporting, analytics, AI and payroll.

Xero also provides 24/7 support, which may or may not be a dealbreaker for you. However, it is worth remembering that Xero’s plan prices are higher than FreshBooks’, and that its more advanced features come at a cost.

Ultimately, Xero and FreshBooks are both solid software options targeting different users.

While both products can get the job done, each has its own technology concept, strengths and weaknesses.