Xero review

Starting a company might be the beginning of something wonderful, but it’s often a nerve-wracking experience with a steep learning curve – particularly when it comes to managing your accounts. Traditional bookkeeping software will help you if you know what you’re doing, but it’s rarely particularly intuitive.

Xero is a cloud-based accounting service that aims to make the job easier while providing some useful extra features. It’s available in three packages, which cost £12, £19 and £24 per month. The most basic Small package places quite strict limits on the number of invoices that can be raised and received, while the Large service is only necessary for those handling foreign currency; it’s otherwise identical to the Medium package reviewed here.

Xero is accessed through a web browser and supports unlimited users.

You access the service through any web browser, immediately giving it an advantage over conventional desktop packages, which can generally be installed only on a Windows PC. While desktop packages are normally licensed for one, three or five users, all Xero packages can have unlimited users, each of which can access the service concurrently from different locations. Each user has their own logon and can be given differing permissions; you could give all sales staff permission to raise invoices, for example, but allow only senior managers to approve them.

Whether starting one of the three packages or beginning with the limited free trial, setting Xero up is reasonably straightforward, but as with other packages there isn’t a great deal of hand-holding for those unfamiliar with the essentials of bookkeeping. Those with no experience are best reading up on some basics, but setup is otherwise as simple as providing the company (or sole trader’s) details, choosing a chart of accounts and adding any bank accounts that will be used.

Once started, using Xero proves to be particularly easy. While other packages have a rigid structure that usually entails adding separate customer and supplier records before any invoices can be created or received, Xero allows you to immediately begin adding invoices, simply typing a recipient name into the To field. If necessary, address and other details can be added later through the Contacts menu, but while it is possible to display suppliers and customers separately, they’re generally treated as a single bank of contacts – a useful time-saver for reciprocal relationships.

Xero shares many features common to all good accounts packages, such as the ability to directly integrate data from a business bank account, but in many cases it manages to provide improved usability. One example of this is in reconciliation, where the software intelligently looks for matches between accounting entries and bank transactions, helping reduce the time spent on manual tallying. Where there’s no obvious link, it’s possible to create a rule; effectively teaching the service how to recognise regular transactions and process them suitably in the future.

It’s hard to make understanding and managing a company’s accounts entirely simple, but Xero has a good stab at doing so. Its main dashboard graphically summarises key bank, incomings and outgoings data, with further detail available by clicking a link on each. Many start-up owners will be frequent visitors to the Accounts receivable section, whose summary page neatly shows what’s coming in, what’s overdue and who the biggest debtors are.

The main dashboard makes it easy to see what’s going on with your company’s finances.

While some might feel nervous about entrusting financial data to the cloud, Xero’s website outlines the extensive systems the company has in place to ensure security. An internet outage could still present a problem, but otherwise using an online service has many advantages, such as providing access to multiple users at multiple locations using multiple computing platforms – there’s even an app for iOS devices such as the iPhone.

Xero’s intuitive interface and cloud-based hosting gives it an advantage over conventional desktop software. While its monthly fee may seem higher than entry-level packages such as Sage Instant Accounts, it’s more powerful and isn’t limited to one or two users.

It does, though, face more relevant competition from online rivals such as QuickBooks, which offers three similarly priced online services, and Crunch.co.uk, which offers an integrated software and accountancy package for limited companies only. Xero is an excellent choice for freelancers and sole traders, but limited companies can get similar features from Crunch’s newly launched Solo package, which is free.