Every business, big or small needs an efficient means of handling all its financial transactions and keeping track of them and this involves a lot of accounting, invoicing and bookkeeping.
Operating a business involves everything from collecting payments to estimating taxes to recording all the financial information pertaining to your business. While many companies are outsourcing the financial function to external contractors, many others are trying to simplify the function and save costs by automating the entire process and doing it themselves.
Very small businesses usually begin by tracking all the financial details on spreadsheets. However, as the business and demand grows, businesses must move to more specific tools to do the job. There are two main financial tools available at this point – accounting and billing software.
These programs allow its users to document all the financial transactions. They are a document of all the finances and can be used as the means for business analysis, shareholder reporting and computing tax liability.
Billing software, on the other hand, are programs that allow you to create and send invoices to your customers in a more flexible and efficient manner. Typically, billing software comprises billing and payments that can be done online, automated reminders and access to the billing portal.
In recent years, the lines between accounting and billing software have gotten blurred; however, both of them still have their differences and specific functions. These days, traditional accounting software also includes the simpler functions of billing software like creating and sending invoices to customers.
Meanwhile, billing software has become more feature-rich and includes complex billing functions like payment plans, discounts and subscription services. Also, billing software can segment the customer data in such a way that end-users can only get access to what they require i.e. outstanding balances.
With the changing technological scenario, both billing as well as accounting software can even be cloud-based and allow particular platforms to communicate with one another.
Some questions to ask yourself before determining what financial tool is right for you, whether your business needs an accounting or a billing tool are:
- Do you require to determine the taxes of your company quickly and easily?
- Do you require a general ledger review regularly?
- Is your business GAAP compliant?
- Do you take care of your business by yourself and do you need an automated method of creating and sending out invoices to your customers?
- Do you need to send out a large number of invoices frequently?
You can determine the best system suitable for the requirement of your business on basis of your answers to the above questions.
The answers to these questions will probably push you towards a traditional accounting software for your business. But before you decide to go in for one, think of a few other aspects such as:
- How diverse are your customer payment alternatives?
- What are the payment options that you offer to your customers today and are you planning to offer any new options in the future?
- If your customer pays within 10 days of the payment date, do you offer any discounts?
- Can your customers set up any payment plans?
- Do you offer subscription billing?
If you handle several different types of customers, it can get rather cumbersome and chaotic without a proper billing platform to manage the billing. Think about your current billing system and how you envision its complexity in the future before making a final decision of whether an accounting or billing software is ideal for your business.
Ideally, an accounting software is the first software you should get for your business to help you record the income and expenditure of the business. Choosing the right accounting software can be a confusing task as there are many options available in the market.
Here are some factors you must evaluate before taking the decision of the right accounting software for your business:
- Is the application online or offline?
- How secure is your financial information and what are the measures to safeguard the data?
- What are the features of the accounting package? It must be able to create invoices, track expenses, manage inventory, handle all bank transactions, record purchases and create purchase orders, manage customer and vendor lists, handle journal entries, account payables and receivables, profit and loss, trial balance and balance sheet handling, etc.
- The software must be simple to use with an easy to navigate user-interface.
- The accounting software must be scalable and accommodate all the changes required when the business grows in the future.
- You should be able to export all your financial data into any other software.
- All your data must be backed up regularly.
- All costs of the software should be available to you upfront when buying the software and there should be no hidden costs that will crop up later on like additional fees for support, upgrades, etc.
- After sales support is the most important aspect of buying an accounting software. Irrespective of how easy or good the software is, at some point in time, you will require support and if the company does not offer this support, your entire investment will be a wasted one.
When you own a business, the major challenges you face are receiving timely payments, sending invoices to customers on time and keeping track of the payments received from clients. Using a billing software can take care of all these activities and save plenty of time for you. However, when selecting the right invoicing software for your business, you must take care of a few things.
- Having an online billing software will help you keep all your billing information organized and in one central place. Also, in this way you can go paperless.
- If there are many people in your organization who handle invoicing, then you must look at a software application that supports multiple users and allows them to send and track the invoices. Check the cost of multiple licenses.
- Depending on your business type, your clients and the features of the billing software, all have a bearing on the cost of the invoicing software.
- Choose an invoicing software that will allow you to include information that is vital to your business such as addresses of you and your customer, project manager details, project start and end dates, etc.
- Your invoicing software should have the capability of sending a reminder to the client when payment from the client is due.
- Some invoicing software can act as a tracker and keep a record of the time spent on projects and enables you to calculate the billable hours for the customers. It also helps to monitor the time for completion of all projects.
- Internet-based billing software lets you login from any place and check your accounts receivable status. You can complete your billing tasks via your laptop or mobile phone.
- If you have any problems with your software, the customer service team should be able to resolve your problems via email, chat or phone. Look for 24×7 support so that you can get help whenever you require it.
Xero is a cloud-based accounting software for small businesses that you can access from any device or computer via the internet. The software offers three plans and all the plans allow an unlimited number of users who can access the software and you can set the permissions to manage the information that each user can access.
The Xero starter plan has most of the features and also includes accounts payable. However, you can only do 5 bills, 5 invoices and 20 bank reconciliations in a month.
The standard and the premium plans of the software have advanced functions including federal and state e-pay and e-file payroll. If you have an international client base, then it is a good idea to go in for the premium plan as it supports multiple currency transactions.
Xero can be integrated with over 500 applications, so you can add the features that are suitable for your specific accounting requirement, although, these features will come at an extra cost. All in all, Xero is very easy and simple to use.
Let us look at some of the features of Xero:
- Easy setup of your account with Xero.
- The program offers simple start-up tasks to familiarize yourself with the software like generating your first invoice, connecting to your bank account, etc.
- Functions are also accompanied by “how to” videos and step-by-step instruction guides to help you through the processes.
- Well-designed and user-friendly interface that is very easy to navigate and can easily be accessed via drop down menus located on top of the screen.
- A comprehensive dashboard that will give you information such as bills that require payment, invoices due, history of your bank account and the items that require reconciliation, all in the form of graphs and charts.
- Cards can be moved around on the screen as per your personal requirement and also feature quick buttons for activities such as creating a new bill, invoice, etc.
- Once a quote is created, it can be converted into an invoice. You can generate repeat invoices and select the frequency of invoice and end date.
- Automatic payment reminders to customers and after receipt of payment. Record the payment and send a receipt to the client via email.
- The “History and Notes” sections give you all the information about the documents created, sent, etc.
- You can track expenses and attach files to invoices of the work done, work details, etc.
- Xero does not track the billable hours, but you can integrate it to time tracking software such as TSheets.
- You can add logs, change fonts, set margins, rename labels, toggle fields, etc.
- You can manage your vendors, track inventory and create purchase orders with Xero.
- When creating your invoice or quote, you can see the number of items in stock.
- It also helps you to track bills, print checks and manage your fixed assets.
- You can run more than 40 reports like general ledger, aged receivables report, etc.
- You can customize the reports, archive them and also export them as Excel, PDF or Google Sheets.
- Your bank and credit card account can be synced to Xero and the inbuilt smart reconciliation tool matches the bank transactions entered into the software.
- The software allows you accept online payments and can be integrated with Stripe, PayPal, Square, etc.
- For an additional fee, Xero can support many businesses.
- You can get the Xero app on your Android devices, iPhones and iPads.
- The software is also supported by podcasts, blogs, Xero TV and Xero U. Through these Xero offers video courses and has user communities for developers and businesses.
- The software has live chat, email or personal support options.
- Xero offers bank-grade encryption to protect all your confidential data, a secure login and lets you set user permissions to control employees’ access to data.
- Xero is suitable for use by all types of businesses — small business owners, freelancers, startups to large organizations.
- You can switch your data from Xero to QuickBooks free of cost and without any change in platforms.
- You can integrate more than 500 third-party software with Xero and also applications such as PayPal, Square, Google and Shopify.
- You can manage the payments and invoices via expense schedules to watch the cash flow. You can create professional invoices and get automatic updates when the invoices are seen.
- Xero offers user-friendly financial reports, 24×7 customer support and excellent data security to ensure that your information is safe.
- Xero is cloud-based, which means it can be accessed from anywhere, anytime, via any device and it is also available as a smartphone app.
- The reconciliation tool of Xero allows you to categorize and transfer bank, PayPal and credit card transactions and monitor employee hours. You can also track the inventory of the items and speed up the process of billing while also monitoring the purchases and sales.
- If you don’t have an internet connection, then you cannot operate Xero. This can be quite a pain if you have to use it in a location where there is no internet access.
- Many users feel that the Xero’s user interface is not too convenient.
- As Xero is a cloud-based accounting tool, it can be accessed from anywhere. You need to ensure that your password is very secure and not shared with anyone or your data can get compromised. Enabling two-step authentication can largely limit the chances of this happening.
For all its plans, Xero offers an unrestricted number of users and so you don’t have to worry about the price of the plan increasing if the number of users increases, while QuickBooks limits the number of users per plan. However, they offer 2 accountants over and above that number. If you require additional users on QuickBooks, it requires the payment of an additional fee.
The Xero plan includes payroll processing of 5 employees in the Standard edition and 10 (going all the way up to 100) employees in the Premium edition, while QuickBooks also offers a comprehensive payroll solution which has all the features as Xero. However, in QuickBooks, this function is available at an added cost of $25 per month and an additional $5 per month for every employee added on the plan for the Essentials and Plus plans.
Xero offers around 20 credit card processors which can integrate with the software. You have the option of adding payment services such as Stripe, PayPal, Square, etc. to the invoice so that your customer can make a payment via a credit or debit card.
QuickBooks has its own credit card processor which integrates with the QuickBooks Merchant Services. Customers can pay the QuickBooks invoices using debit or credit cards. QuickBooks also has around 30 credit card processors that are integrated with it for payment.
Both QuickBooks as well as Xero offer 3 pricing plans. When it comes to the features at the particular pricing, Xero beats QuickBooks.
While the starter plan of Xero is at $9 per month, QuickBooks is at $15 per month. Both Xero and QuickBooks limit the number of bills paid that you can enter in the starter plan. While you can pay 5 bills per month on Xero, the QuickBooks Simple Start does not have any bill payment feature.
The Standard plan of Xero and the Essentials plan of QuickBooks are the next level of plans. While Xero Standard is priced at $30, QuickBooks Essentials is priced at $35 monthly. Both plans offer similar features such as generating reports and bills payment.
Xero offers unlimited users and processing of payroll for up to 5 employees, while QuickBooks Essentials does not have payroll processing, but you can include it at an additional cost.
The Xero Premium and QuickBooks Online Plus is the third level plan and the cost of Xero is $70, while the price of QuickBooks is much cheaper at $50 per month. Xero Premium offers an unlimited number of users and you can process the payroll of up to 10 employees, while on QuickBooks, you have to pay an additional cost for payroll.
If you’re looking for an accounting software which offers more value in terms of the features it offers, then Xero is a great choice. By offering access to unlimited users for all the plans, having payroll included in both the Standard and Premium versions of the software, taking credit card payments and having more features for business integrations, Xero gives you the best value for money compared to QuickBooks.
Not many bookkeepers and accountants are conversant with Xero as compared to QuickBooks. So, if you want any local Xero support, you may have a tough time finding one. Also, the customer support of Xero falls short when compared to QuickBooks.
Xero is a close competitor and is better than QuickBooks in terms of a number of features for the price and the number of users, as Xero’s pricing plans allow access to unlimited number of users and the standard and premium versions include payment processing at no extra cost.
In terms of the functions, both Xero as well as QuickBooks are quite similar with regard to the setup time, every day transaction handling like invoicing customers, billing, running financial statements, importing credit and bank transactions, etc.
FreshBooks is a cloud-based finance and accounting software meant for small and medium-sized owners. In 2016, FreshBooks won the Supreme Software Award and the Best Accounting Software Award by Finance Online. FreshBooks is used by over 5 million businesses for client invoicing and time tracking. The application has great features and a flexible pricing plan that is beneficial to SMB owners.
FreshBooks has several packages that are suited for different businesses of varied models and sizes. It also provides a number of add-on features like client portals where the customers can view their invoices and the amounts they owe free of cost, without downloading any software.
- It is very easy to setup and use.
- The interface is very streamlined and you don’t have to be an accounting professional to use the application and the software guides you through the entire process. It even has some video tutorials to simplify the process.
- The software provides auto-fill features and drop-down inventory menus.
- As you keep entering details for the same customer several times, the software fills the client’s details like currency, language preference and other stored details of the customer automatically. It also automatically calculates the discounts and taxes applicable.
- You can save the invoices as PDFs and send them via email or regular mail.
- FreshBooks also helps you to manage tasks, projects, budgets and team members.
- You can set various levels of permission for your employees to have access to the software.
- You can save the inventory item details using FreshBooks along with their unit costs, product descriptions and tax rates.
- You can also add new client details and information.
- FreshBooks offers excellent customer support and if you don’t have the time to contact a representative, then you can access the FreshBooks user community for help.
- FreshBooks provides videos for support that are very helpful and up to date. FreshBooks also conducts webinars regularly for its users.
Small and medium-sized businesses need a good accounting system in place. While many are still using manual methods, in order to stay ahead of the competition, businesses must look at getting an automated or cloud-based accounting software.
Use of accounting software has indeed redefined the way businesses manage their accounting activities and this has reduced human errors and wrong documentation significantly.
Let us now take a look at the differences between FreshBooks and QuickBooks.
QuickBooks is a total online enterprise accounting solution for small and medium businesses. The software provides comprehensive features that help to manage accounts and crunch numbers. QuickBooks also acts as a payroll system and is packed with full-service payroll tools.
However, the QuickBooks application has been developed with the professional accountant in mind and may not be very user-friendly if you are not into accounting and it may take some time for you to get accustomed to it. QuickBooks is pricier compared to FreshBooks, but it is packed with features for that price.
FreshBooks, on the other hand, simplifies the accounting operations for business owners, small or medium. This platform is cloud-based and has features such as time tracking and invoice generation. One of the biggest pluses of FreshBooks is its customer service.
However, since FreshBooks has not been designed as a full-service accounting program, it lacks some accounting functions that are available in QuickBooks. FreshBooks is a cost-effective software that is aimed at small organizations and does not offer too many complex functions. FreshBooks also has a free trial plan that allows you to test the features of the app before opting for it.
Both FreshBooks and QuickBooks are cloud-based and are available as apps for mobile devices too. However, if your business has complex accounting demands and also requires a payroll solution along with accounting, then QuickBooks is the best solution for you. And, if your business is small that bills by the hour and does not require high-end accounting, then FreshBooks is the way to go.
- FreshBooks is great for intuitive accounting. It has single click functions and the dashboards are very well-organized. It is one of the easiest softwares to operate in the market.
- You can get unlimited access to your data and managing the data is very easy. You can also access FreshBooks on your smart devices via its mobile platform. FreshBooks works well on Mac and Windows, and Android and iOS devices.
- With FreshBooks, you can accept online payments and choose between Amex, MasterCard, Visa, PayPal, etc. You can set alerts for late payments and trigger notifications. You can also track your past and current invoices and control your cash flow.
- You can track the working times and expenses concurrently.
- FreshBooks ensures that your accounting is completely free of errors, is not time-consuming and it also monitors the balance sheets in real time. With just a few clicks, you can generate reports. The process is fully automated and you can export the final reports in any format you want, anytime.
- FreshBooks is always innovating and introduces new features, advanced reporting techniques, etc. and their teams are working all the time developing newer features for the software.
- FreshBooks still lacks some of the high-grade enterprise functions, which will probably be available in the future.
- The invoices generated on FreshBooks cannot be automatically transferred to other software like QuickBooks and must be entered manually for any modifications.
Xero provides a 30-day free trial to its customers and you have 3 pricing plans to choose from.
- $9 monthly
- 5 quotes and invoices
- 5 bills
- 20 bank transactions
- $30 monthly
- Invoices and quotes, bills and bank transactions
- 5 payrolls
- $70 monthly
- Quotes and invoices, bills, bank transactions
- 10 payrolls
- Multi-currency transactions
FreshBooks has a flexible pricing where the plans can be tailored to suit the requirements of the particular business. It also offers a 30-day trial where you can test the features before choosing the plan that works best for you. You can choose from:
- $15 monthly
- Billing for up to 5 active clients
- $25 monthly
- Billing up to 50 active clients
- $50 monthly
- Billing up to 500 active clients
- FreshBooks takes the safety of the information of its customers very seriously and the reliability of the systems, data and software are the top priority at FreshBooks.
- All information transferred between FreshBooks and your systems are encrypted by 256-bit SSL encryption.
- All your data is safe behind firewalls that are Cisco powered.
- The FreshBooks servers are constantly scanned for any weaknesses by AlertLogic and any threats are resolved quickly.
- All the data entering and leaving the FreshBooks network is constantly monitored by an IDS or Intrusion Detection System.
- Sensitive financial information like bank account details and credit card details are all encrypted in the FreshBooks database using AES.
- The servers of FreshBooks are located in state-of-the-art datacenters that are equipped with fire suppression, redundant power feeds, biometric access, etc. to ensure that the servers that store your data and manage your billing are adequately protected.
- All the data is stored in redundant storage and servers so that even in the case of any hardware failure, your data is not lost.
- All your valuable data is replicated across several database servers to prevent data loss. Also, if there is any calamity that results in the loss of your data, the information can be restored very quickly.
Finding a perfect accounting or invoicing software for your business is not an easy task. You must take time and evaluate the various options available before making your final decision because once you invest your time and money into an invoicing or accounting system, it will be very difficult to migrate to another one after some time if the current one doesn’t work for you. So, it’s always better to spend more time before the purchase to save yourself frustration at a later stage.