Lets take a look at why I chose Xero.

My company year end has just passed and I’m starting the new year using a new accounting package, Xero. This is a big change, I’ve been using spreadsheets for the last 5 years. While an Excel based system is fine when you first start and you only have a hand full of transactions, it doesn’t work quite so effectively once you are billing multiple clients each month.

Choosing an accounting package isn’t easy. There are lots of alternatives available. Ask other people for recommendations, and it becomes no clearer. Everyone has their own favourite. Which one is right? well, it all depends on your requirements. Lets take a look at why I chose Xero. You can also check it out for yourself.

Reason 1. I need to systemise and outsource my book keeping with a leading cloud based accounting package

I realised that the admin tasks that surround my accounts were taking up too much time, and also that I shouldn’t be doing them all personally. Before I can hand anything over to somebody else I need some proper systems. I need to do something about this and I can’t leave it much longer.

My selection criteria:

• Able to meet the needs of a consulting & coaching business that trades both £ for hours and sells information products online
• Accessed by me, and whoever I choose to help me with book keeping.
• Access from multiple computers and locations. Desktop from the office, laptop when travelling, plus its likely the book keeper will be located remotely.
• Interfaces directly with online banking and credit cards to avoid keying in transactions,
• Has an ecosystem of other applications that can extend functionality as the business grows and evolves
• Able to submit key tax returns to HMRC for PAYE and VAT, and likely to comply with all the changes that HMRC’s making tax digital programme is likely to introduce over the next couple of years.

These requirements aren’t complex, but remote access means a cloud based solution is best. Its likely that any of the popular cloud based packages would do a commendable job. Some of these market themselves specifically as packages suitable for consultants, coaches or freelancers.

Reason 2 Xero seems to be the choice of most practising accountants

I asked around, and got recommendations for Xero, Quickbooks, Freshbooks, FreeAgent, KashFlow and Sage. This became my short list.

My accountant friends seemed to favour Xero, while the non accountants tended to like Quickbooks. I’m an accountant so I took notice of this.

I checked out freshbooks and quickly found that this had evolved from an invoicing package intended for consultants and contractors. I saw it also had extensions to interface with Xero and Quickbooks so that your accountant could translate the information into his preferred package. The existence of these plug ins immediately waved a red flag at me.

I also checked out some UK based reviews of Freshbooks, and found that it’s VAT handling was a weakness. Freshbooks is developed in the USA and is very USA centric. There are changes coming along in the UK from HMRC as part of the Making Tax Digital programme in the next 3 years. To comply with Making Tax Digital you will need an accounting package that is designed to handle UK taxes well. Based on its ability to handle VAT, there is little evidence that Freshbooks will be a good long term choice for UK tax payers.

Freshbooks was eliminated from the evaluation process at this point amid concerns it wasn’t a proper fully functioning accounting package able to deal with statutory accounts, taxation and payroll. That doesn’t mean Freshbooks won’t work for you. If you have a simpler set of requirements, and are outside the UK it might be the right choice. The best way to find out is the Fresh books 30 day free trial. I’m a firm believer that the only way to find the right solution is to go and road test it.

Sage has often been advertised as the choice of accountants. I decided to take a look at some reviews. Sage is based up here, in the North East of England, so I felt some bias to buy local. The reviews and comparisons I read always seemed to show Sage as second best to whatever it was compared against.

Reason 3 – I want a package that meets the needs of all the businesses I’m involved in.

I’m involved with other businesses besides my own. My daughter runs a coffee shop, my wife a healthcare practice, and I’m responsible for the finances of the local sports centre where I act as a trustee. None of these use an up to date accounts package, and as each one starts a new financial year I want to move to something more appropriate. I don’t want to learn more than one package, so the answer for my own business and for each of the others needs to be the same system. Some of the packages market themselves as being optimised for consulting and contracting businesses. While this would serve my own business well, it wouldn’t meet the needs of the others.

• Cash transactions through a cash register, and possibly cater for future upgrade to cash registers that can link directly into the accounting system
• Can handle multiple rates of VAT, and a not for profit that is partially exempt from VAT
• Able to link to an online store and systems that handle inventory,
• A cost effective solution for a non profit organisation.

FreeAgent dropped out of the list at this stage as it appeared to me to be aimed firmly at the freelance market, and I was concerned about its wider application.

Reason 4 Connectivity. Xero can interface with just about anything.

I saw some immediate needs to connect systems together. I use acuity scheduling and stripe to both book and collect payment for one on one coaching sessions. Paypal is my choice for paid for webinars. My accounting package needs to talk to all of these as a minimum. Xero does this, and has great connectivity with many other systems. There are hundreds of apps in the Xero ecosystem. The ecosystem will allow Xero to operate seamlessly with timesheet systems, receipt processing systems, and many others. This connectivity, and the ability to use Zapier as a tool to make additional connections is the great strength of Xero. Quickbooks offers a similar ecosystem. If you need great connectivity then it really does come down to a straight choice between Quickbooks and Xero.

I’ve considered Shoeboxed as a solution to handle conversion of receipts from paper to electronic documents. Shoeboxed interfaces with both Xero and Quickbooks, and pulls in the chart of accounts. This allows Shoeboxed to send an already coded transaction along with the receipt to Xero.

Reason 5 It must be future proof and secure

Moving away from all my financial records being held locally where I can secure the information, to being held in the cloud worried me. Plus the new system would have access to online banking. A hackers dream? So, I looked closely at how each vendor was dealing with online security. Naturally each of the leading companies were dealing with this. I was particularly impressed with the proactive approach that Xero are taking.

Xero can grow with my business, for example the payroll will accommodate up to 200 employees.

Whichever system I choose must be kept up to date. That means it will:

• meet changing regulations for reporting and tax, in particular HMRC “making tax digital“
• be able to interface with new commerce solutions as they come to market
• constantly improving functionality to allow extra automation

And the winner is…..

Xero vs Quickbooks
Why I chose Xero for my company accounts

Xero. I took Xero on the free 30 day trial and had a good look at what it can do. During the trial I looked at the demo company. I also set up some basics for my own company. Xero is easy to use, and I liked what I saw. I decided to buy, and managed to take advantage of a black Friday deal. Xero is doing everything I’ve asked of it so far. Its still early days, but I feel I’ve made a good choice.

Two months on from Black Friday and I’m just starting to set up the second company.  This time its the local sports centre. Its a non-profit, and Xero has given a substantial discount to the monthly subscription for this.

Are you thinking about buying a cloud accounting package for your business? Give Xero a 30 day free trial. If your requirements are simpler, and UK taxes aren’t a concern then a good alternative is Freshbooks. Freshbooks also have a 30 day trial available. My view is this is the only way to see if it works for you. Whatever accounting solution you decide might be right for you, and there are many to choose from, the most important thing is to try it before you buy it.