FreshBooks Versus Xero

FreshBooks and Xero are two popular accounting and invoicing software programs. Today, we’re comparing the two to help you decide which one offers the best choice for your small or medium-sized business.

What’s the Difference Between the Two?

FreshBooks was launched in 2003 and quickly became the number one alternative to the world’s most popular accounting software, QuickBooks. Today, FreshBooks and QuickBooks remain the two most popular accounting and invoicing software programs by a large margin.

Xero, however, is a rapidly growing alternative. Launched by a New Zealand company in 2006, Xero is a full-featured accounting software based on the cloud – just like FreshBooks and QuickBooks. It claims to be the best option for small to mid-sized businesses and offers more accounting features and tools than FreshBooks (FreshBooks specializes primarily in invoicing rather than accounting).

Xero is famous for its integration with services like Salesforce and PayPal. FreshBooks is famous for its invoicing customization and other features. Which bookkeeping service works best for you? Let’s break down some of the pros and cons.

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Pricing

Both FreshBooks and Xero come with a 30 day free trial. So there’s nothing stopping you from taking both services for a spin for 30 days to try them out.

After that 30 day trial is over, you’ll pay the following rates:

Xero

Starter Plan ($20 USD Per Month)

Create and send 5 invoices
Enter 5 bills
Reconcile 20 bank transactions
Unlimited 24/7 Support, Users, File Storage, and Integration with 400+ Apps

Standard Plan ($30 USD Per Month)

Unlimited Invoices
Unlimited Billing
Unlimited Bank Transactions
Unlimited 24/7 Support, Users, File Storage, and Integration with 400+ Apps

Premium Plan ($40 USD Per Month)

Unlimited Invoices
Unlimited Billing
Unlimited Bank Transactions
Unlimited 24/7 Support, Users, File Storage, and Integration with 400+ Apps
Multi-Currency Accounting

As you can see, businesses that deal with billing in multiple currencies will need to use the Premium plan. Otherwise, multi-currency accounting is not supported. If you have more than 5 customers, then you also won’t be able to use the Starter plan, which only lets you create and send 5 invoices per month.

Compare that to the cheapest FreshBooks plan, which lets you send unlimited invoices to 5 clients per month, and FreshBooks is the cheaper solution.

In general, Xero’s pricing plans are closer to what you see with QuickBooks. FreshBooks, however, tends to be quite a bit cheap than both Xero and QuickBooks.

FreshBooks

Sprout ($9.95 Per Month Billed Annually; $10.95 Month to month)

Unlimited Invoices
Bill Up to 5 Clients
Unlimited Expenses and Time Tracking

Seedling ($19.95 Per Month Billed Annually; $21.95 Month to Month)

Unlimited Invoices
Bill Up To 25 Clients
Unlimited Expenses and Time Tracking

Evergreen ($29.95 Per Month Billed Annually; $32.95 Month to Month)

Unlimited Invoices
Bill Unlimited Clients
Unlimited Expenses and Time Tracking
Add 1 Staff Member
Team Timesheets
Track Expenses and Revenue by Staff Member

Mighty Oak ($39.95 Per Month Billed Annually; $34.95 Month to Month)

Unlimited Invoices
Bill Unlimited Clients
Unlimited Expenses and Time Tracking
Add Up to 5 Staff Members
Team Timesheets
Track Expenses and Revenue by Staff Member

All FreshBooks plans also come with strong invoicing support – even on the cheapest plans. So you can customize your invoice extensively.

Overall, FreshBooks is significantly cheaper than Xero. However, FreshBooks doesn’t quite have the same broad range of features you see in Xero. We’ll talk about features down below.

Features

Xero promises to give you everything you need to run your business. That means it includes a full suite of bookkeeping software and accounting software you can use to manage your business.

FreshBooks makes a similar promise, but overall, FreshBooks doesn’t have the same breadth of accounting features you’d find in Xero.

Xero Features

Online Accounting: You can track your accounting information over the cloud, reducing the need for manual entry. You can also view accounting info for your business from any internet-connected device. On some plans, you can add members of your team who can also view or edit your business’s accounting data.

Invoicing: Invoicing with Xero is straightforward. You can accept payments via credit card or PayPal. You can also choose from multiple invoice templates.

Bank Reconciliation: Connecting Xero to your bank account lets you get your bank statements imported and categorized automatically.

Payroll: You can’t run Payroll with Xero, but you can track employee payroll information using the simple Xero payroll tool. Payroll data is automatically updated in the general ledger.

Mobile: Xero’s mobile apps are available for free for Android and iOS. You can perform a surprising range of functions on your mobile device, including creating expense claims on the go, sending invoices, and doing bank reconciliation.

Inventory: Xero can track the value of your inventory and improve stock control using a handful of valuable inventory tools. Inventory is broken down with data like average cost, average sales, total values, etc.

Quotes: Provide customers with quotes for your goods and services and then turn those quotes into invoices once the work is complete.

Expense Claims: You can create expense claims from anyone, including the ability to take a photo of your receipt with the mobile app. All your receipts for a particular project are kept in one place.

Reporting: View and share reports and budgets for your business in real time (you don’t have to wait for the end of the month).

Payments: Schedule payments and pay suppliers. Or, view a graph of required upcoming bill payments.

FreshBooks Features

As mentioned above, FreshBooks is primarily an invoicing software. As such, you’ll find that its features primarily revolve around creating, tracking, and managing invoices. Its core features include:

Invoicing: This is where FreshBooks shines. FreshBooks invoices can be extensively customized, or you can just leave the good-looking templates as-is. Those invoices can be sent to your clients, downloaded as PDFs, or printed directly from FreshBooks. You can accept payments via credit cards and setup multi-currency invoicing with FreshBooks. FreshBooks also has a popular feature that lets you see when an invoice has been viewed – so you know if a client is being slow to pay.

Expenses: Tracking expenses is easy with FreshBooks. Just like with Xero, you can take a picture of your receipt with the mobile app and add it to a project’s expenses. It’s a paperless system that minimizes hassle on everybody’s end. You can also automatically important and categorize expenses from bank accounts and credit cards. Or, track your spending over time across different categories – like lunch, gas, or client dinners.

Time Tracking: FreshBooks promises to make it easy to create detailed invoices from your billable hours. One popular feature is the mobile timer, which lets you track the time you spend on a particular job. Your mobile phone ticks away while you work. There’s also extensive team time tracking features. Plus, all your hourly data (and your team’s hourly data) can be logged directly into invoices.

Reporting: FreshBooks reporting isn’t as extensively detailed as full-fledged accounting software like Xero or QuickBooks, but it still provides a comprehensive view of your company’s invoicing. FreshBooks lets you see your billing history over a certain period of time, for example, and you can easily send invoicing information to your accountant for tax time.

Payments: Accept payments by VISA, MasterCard, or American Express. FreshBooks transaction fees start at 2.9% + 30 cents per transaction. You can also pay via PayPal, Stripe, and Authroize.net

Which One is Right for You?

FreshBooks is powerful invoicing software. Xero is powerful accounting software with its own invoicing tools.

If you need full-fledged accounting software, then Xero is your best option. If you only need help managing your invoices, and you already have your own accounting system (or your own accountant), then FreshBooks is a simple and cheap way to manage the billing side of your business.