Xero is an accounting solution often presented as an alternative to QuickBooks or Sage. It’s a little more user-friendly and designed as a straightforward, intuitive solution built for accountants and inexperienced business owners alike.
The tool provides thorough records and transaction forms, it’s a double-entry accounting tool—so you’re able to maintain an accurate record of every transaction class in your system—assets, liabilities, income, and expenses. While double-entry book-keeping is the CPA standard, it can be complicated for the layperson to understand.
Xero brings simplicity to double entry without compromising accounting integrity. The software is best known for its inventory and contract management tools, as well as its ability to process payroll and automate busy-work functions.
Xero Expenses is part of Xero accounting. You can easily use both tools within the one app, it’s a new feature rather than a separate thing you need to buy and integrate.
What is Xero?
Well, Xero is a piece of cloud-accounting software that claims that they will make running a small business easier. Xero can help you get a clear picture of your cash flow, automate the invoicing process, and help you move into a more organized place.
The tool isn’t exclusively built for expense management, but it does come with an expenses feature built-in. The advantage here is, you don’t need to pay for an extra monthly service to deal with receipts and mileage.
Xero benefits your business in that you can automate a lot of tasks and rely on saved information to get through accounting tasks faster. Save templates and copy tasks, so you don’t have to start from scratch each time.
Improves Visibility so You Can Save Money
Xero aims to help you get a handle on your cash flow. The dashboard provides a view of all of your accounts at one time, so you can compare sales against orders and expenses.
For expense management, you can approve incoming claims and pull up reports by company event or project. Built-in analytics help you track patterns and use data to inform business decisions.
Mobile App Helps You Track Expenses
Capture your receipts as you get them. Simply snap a picture with your phone as you pay for items, so you don’t forget. The photo feature is standard with most expense management solutions, but it’s worth noting that you can approve receipts from the mobile app and quickly process reimbursement claims.
This function also has the option to enable push notifications, so everyone stays informed.
The dashboard uses the same format you’ll find with a lot of these cloud-accounting tools. The tabs run across the top and separate functions into accounts, payroll, reports, contacts, advisor, and settings.
The accounts area is where the bulk of your accounting activities will take place. his tab houses bank accounts, expenses, fixed assets, purchase orders, sales, and checks. From there, you can look into a range of sub-functions like inventory and ordering.
Reports exist in their own part of the site. Xero offers 65 report templates, which include several payroll reports, balance sheets, budgets, and payables. No profit and loss report is included in the lineup.
From entering bills to reconciling bank accounts, Xero doesn’t require an accounting background to get settled into the dashboard.
While the set-up is easy and the customer support is there if you need them, Xero does require a bit of training. It’s easier to learn than similar solutions like QuickBooks Online. But, it’s more complicated than freelance-centric options like FreshBooks or FreeAgent.
When you sign up for Xero, the site will guide you through the process with a series of prompts. You’ll add your banking details, as well as things like your starting balance, categories, and contacts. They don’t hold your hand through the entire process but provide links to the remaining steps.
We also recommend adding an items list, setting up automation, and preferences. If you’re completely new to online accounting—or accounting in general—it might be worthwhile to set up a training with a Xero advisor.
Store and Receive Bills Online
If you’re receiving bills by mail or email, you can easily upload them to the Xero portal for processing and storage. Recycle paper bills and get them out of the way—Xero promises frequent backups so all docs are safe and sound.
In addition to the easy import function, Xero lets you repeat or replicate bills associated with recurring charges. Over time, this will save you hours of manual data entry and keeps your accounts payable process running smoothly.
Or, upload bills the standard way by adding bills and scheduling them for payment. Bundle bills together and process all of them at once, if you like.
The selection of features associated with Xero’s bill management is particularly useful—you can always see what’s due and can compare pending payments with your cashflow reports, so you’ll always know what’s ahead.
Xero doesn’t quite handle expenses the same way as other online accounting tools. Expenses are a category within the invoicing and receivables tabs.
You’ll need to upload receipts and invoices to your account and classify that expense. This way, you won’t forget to charge customers for those extra costs when it comes time to send out the invoice.
Employee expenses must be processed as claims. Unless you need a solution with advanced expense reporting, the spread out expense functions shouldn’t be an issue.
Categorize your expenses and other details by team, location, or project. Xero allows you to set up two tracking categories and each comes with 100+ tracking options which can be used for reporting later on.
Speaking of tracking, Xero doesn’t offer a way to keep track of time. So, if you’re looking for that feature, this might not be the best option.
Xero allows you and your staff to file expense claims in the platform for later reimbursement. Your designated admin will need to approve each claim. This feature isn’t included in a lot of competing solutions, many just offer the ability to deduct mileage or require an invoice workaround.
Collaboration and Controls
The platform allows you to share access with an accountant, so they can collaborate in real time. What’s more is, the app allows you to give your staff access to the tool and set limits according to what info they need to do their job.
Below, you’ll see just how extensive the Xero permissions are. User permissions allow you to control who can view certain information, submit orders, or approve expense claims.
Xero offers a 30-day free trial without requiring you to put down a credit card for access. During that time, you can get a feel for the software to see if it works for your company. They also offer a six-month introductory pricing. That said, here is a look at the regular prices, on a per month basis.
Starter, $9 per month
The starter pack doesn’t provide much for an actual business. Yes, you get the expense tracking feature, but you can only reconcile 20 bank transactions and send five invoices per month and pay five bills. You do get customizable reports and can upload W2s and 1099s.
Standard, $30 per month
Upgrade to the Standard and you’ll get expense tracking and reporting, just like the Starter. But, now, there’s no limit on the number of transactions you can process. Unlimited invoicing, billing, and banking. Plus, Xero Standard includes payroll for five users.
We recommend this plan for a small business with one or two employees. You get the bulk of the functionality without limits but won’t break the bank.
Premium, $70 per month
The premium plan looks a lot like the Standard. But, now, they’ve added multi-currency support and payroll for 10.
Upgrade to Premium 20 or Premium 100—and get payroll for 20 and 100 people respectively. If you need to process payroll for more than 100 employees, it will cost an additional $2 per user per month.
As a cloud-hosted software, Xero is compatible with any device that connects to the internet. You’ll need an updated browser for best results. Additionally, if you’d like to track expenses with your mobile device, you can download the Xero app for Android and iPhone.
Xero provides a checkup tool so you can look at whether or not your security settings are up-to-date and that your browser can support the app.
Xero was designed to meet the needs of the average small business. The entry-level plan limits users to five invoices and 20 transactions a month—which makes it seem a bit pointless. If you’re only billing five invoices, chances are you don’t have much of a business to manage.
That said, once you upgrade to the top-tier plans, you’re looking at unlimited users and transactions. The software encompasses so many functions like inventory, payroll, and tracking. As such, it should work for all types of businesses—two-person service companies, e-commerce shops, and multi-location companies with a lot of purchasing power.
The accounting software is pretty extensive, so chances are you don’t need a ton of add-ons to make it worth your while. That said, the ability to plug into your e-commerce tools is pretty fantastic.
Options like BigCommerce, Shopify, and Squarespace can be synced with Xero, so you don’t need to comb through each platform to find missing data.
Xero really shines when it comes to being helpful. The customer service is prompt, but the in-app search can provide more answers than you might expect.
The on-boarding process comes with various videos and a step-by-step walkthrough. You’ll also have to option of searching through their database of resources.
Xero provides a range of content—video, podcasts, tutorials, and blog posts. So, there’s a wealth of information for users who want to get to know the software on their own.
If you’d like to talk to someone, you can connect via social media or email. Xero doesn’t list a phone number on the site—which might be a drawback for some users who would prefer to make a call and get a walkthrough from a real person.
Beyond the phone thing—which is probably just fine with most phone-averse millennials, Xero offers unlimited support, as well as several web-based resources.
Functionality by Business Type
The Xero site lists out the reasons to use the app by industry, so you’re getting a chance to see how it can help you—whether you own a retail store, a cafe, or you’re in healthcare—among a long list of other sectors. It’s nice to see how e-commerce integrations can work with Xero. Or, how you can use the inventory management feature to order for multiple warehouses.
In short, we thought it was impressive that Xero was so committed to providing customers with a clear picture of how the tool could work for them in a really specific way.
All features come with a dedicated page that features the bullet points and capacity of each tool, as well as a video with more information. There are plenty of screenshots, so customers can get a sense of what it’s like to use the tool.
Xero Central is Xero’s help center. The site focuses on covering FAQs and will walk you through everything from managing your personal data to paying your first bill.
Is Xero Worthwhile for Expense Management?
Xero is one of the better accounting software options out there. You can easily bring up reports and track all of the money flowing in and out of your business.
We liked that Xero does accounting tasks right the first time, so your accountant won’t need to redo a whole bunch of tasks when tax season rolls around.
Expense management software works best when it connects with other functions. And, with Xero, everything is there, from one platform—so expenses can be billed to clients and reimbursements included with payroll.
That said, Xero isn’t the tool for businesses that require automated expense reporting, mileage tracking, and advanced reporting. Expense management features are spread throughout the tool, divided by internal and external allocations.
We recommend this tool to any business that wants a piece of accounting software for expense tracking, as well as for accounts payable, accounts receivable, and everything else.