FreshBooks vs Xero: How They Compare

Both FreshBooks and Xero are cloud-based accounting software that operates under the software-as-a-service (SaaS) model. FreshBooks provides a software environment that blends accounting and project management, making it ideal for self-managed businesses and freelancers. In comparison, Xero has more accounting features, making it an excellent choice for growing businesses, especially product-based companies.

• FreshBooks: Best for freelancers and DIY business owners
• Xero: Best for businesses that require strong inventory accounting

Why You Can Trust Fit Small Business

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Use Cases and Pros & Cons

User Reviews: FreshBooks Wins

Pricing: Xero Wins

Xero wins in pricing because it is priced affordably for unlimited seats. FreshBooks becomes more expensive as you add more seats.

Features: Xero Wins

Xero takes the lead in accounting features. Given that it is a more comprehensive accounting software, we see it as a well-rounded solution. Whether you’re a service provider or retailer, it can adapt to your business needs. FreshBooks, in comparison, offers a simpler and more intuitive experience while sacrificing some advanced features. We recommend it to freelance service providers who only need to track income and expenses for projects.

Banking & Cash Management: Xero Wins

FreshBooks is a bit complicated and limited in its banking features, especially with bank reconciliation. What we noticed is that it deducts all entered expenses from the Petty Cash account manually.

The only way to assign expenses to the appropriate checking account is by matching transactions in the bank feed. Therefore, without a bank feed, you can’t designate which accounts for subtracting expenses, making FreshBooks unusable if you have more than one bank account and no live feed established.

Meanwhile, Xero’s banking and cash management system allows—but doesn’t require—a bank feed connection. You can set up different cash accounts, reconcile book and bank statements, and print checks.

We’ve noticed several setbacks on Xero that aren’t material per se, and these mainly focus more on practical expediency. We saw that it’s impossible to combine payments received from customers into a single deposit entry, even if they’re all checks or all cash. The problem this creates is, your Xero check register will show multiple deposits while your bank statement will show the actual deposit amount, which has all the amounts combined. This will make it difficult to do your bank reconciliation.

Another minor drawback with Xero would be the inability to enter the ending balance of the checking account in the bank statement. For expediency, we’d prefer just to enter the bank statement balance and reconcile directly. Instead, Xero requires users to upload a bank statement before reconciliation.

Accounts Receivable: Xero Narrowly Wins

Xero leads by only a few points. However, that doesn’t make FreshBooks an underperforming software in terms of A/R. We recommend Xero if you want all the necessary features in A/R, such as invoice customizing and full-scale A/R management. FreshBooks is ideal for simple invoicing and small-scale A/R management.

Accounts Payable: Xero Wins

Xero scored higher in A/P because it showcases basic and advanced features like recording vendor credits and independent contractor billings. As a complete accounting software, we’re not surprised to see these features in the platform because it covers everything from vendor creation to billing management.

FreshBooks didn’t fail miserably in A/P, but it does lack in some areas where Xero excels. For instance, it doesn’t have purchase orders (POs) and vendor credits, but these are forgivable since FreshBooks excludes inventory management as a feature.

Hence, Xero is the clear winner if you want all the essential A/P tools and features, including purchase order and vendor credit tracking. FreshBooks is more of a niche pick, specifically for businesses that don’t deal with inventory.

Project Accounting: Xero Wins

You’ll find both FreshBooks and Xero useful if you’re a service-based business that works on projects or bills clients by the hour. You’ll have the option to set up hourly or flat-rate projects and assign them to your employees or customers. Once you’re done with a project, you can convert it into an invoice easily.

When setting up a project estimate on both platforms, you have the option to add sales taxes, inventories, and labor. You can also compare cost estimates to actual costs, which is useful for contractors. The only project accounting feature lacking in FreshBooks is the ability to assign actual inventory costs to a project, which is expected since FreshBooks doesn’t provide inventory accounting.

Reporting: Xero Wins

FreshBooks and Xero have 14 out of the 16 reports that we expect to see in an accounting software service. However, some of FreshBooks’ reports seem to lack expanded functionality. For example, its balance sheet only shows the parent accounts and omits important details like subaccounts. Viewing unbilled charges and time is possible on FreshBooks, but you can’t generate a report for it.

Clearly, Xero outclassed FreshBooks in this criterion, as Xero’s reporting features are more comprehensive and customizable than FreshBooks’. Xero reports are also comparative, which means that reports show at least two reporting periods.

Mobile App Functionality: FreshBooks Wins

Both FreshBooks and Xero have downloadable apps in the App Store and Google Play that you can use on your phone, tablet, or mobile device. An internet connection is needed to use the app, and users can add, edit, or remove data through the app.

The FreshBooks app is a more convenient solution than Xero’s. FreshBooks has an invoicing on-the-go feature, which speeds up collections from clients. Moreover, it lets you capture your receipts for easy organizing and documenting, and it features time tracking for billable hours and a mileage tracker via GPS for monitoring your automobile expenses.

The Xero app has the basic features found in the cloud version, such as invoicing, bank reconciliation, cash flows, profit, and loss. A useful feature is its contact management integration with invoicing. The app also lets you add contacts, and Xero gives you useful information about the person automatically, such as the average days to pay and billing activity.

Ease of Use: FreshBooks Wins

FreshBooks takes the lead in terms of ease of use. We believe that it is easier to use and more intuitive than Xero, especially for freelancers and users with limited accounting knowledge. Xero is a more capable accounting software, but it has a learning curve. If you have an experienced accountant in your business, pick Xero, but if you intend to DIY accounting, FreshBooks is better.

FreshBooks is much more straightforward, which is expected since the software caters primarily to users without accounting experience. Xero’s difficulty is average for someone who has been using accounting software programs for quite some time. However, first-time users might find a little bit of a learning curve.

Assisted Bookkeeping: Tie

We called a tie for this criterion because both software need third-party providers for assisted bookkeeping. The bookkeeping service isn’t included in the subscription price, so you’ll need to pay an additional fee to get it.

FreshBooks doesn’t offer assisted bookkeeping services directly. Instead, it partners with Bench, an online bookkeeping service that helps you find a bookkeeper. To learn more, read our review of Bench.

Meanwhile, Xero offers certification programs for bookkeepers and CPAs. You can hire independent Xero Advisors or integrate with Bookkeeper360 to get bookkeeping assistance. Check out our Bookkeeper360 review for more details.

Customer Service: FreshBooks Wins

FreshBooks is famous for its excellent customer support. You can call its customer service hotlines, ask a rep to call you, or contact the provider via email. There’s also self-help information for frequently asked questions (FAQs) about FreshBooks features and how-tos.

Xero, on the other hand, has limited customer support. You can only interact with a chatbot that’ll guide you through some common customer problems or redirect you to self-help articles on Xero’s support page. Also, the only way to contact the provider is via email.

How We Evaluated FreshBooks vs Xero

We evaluated FreshBooks and Xero based on ease of use, pricing, and how well each one performed against the ideal features we’re seeking, including banking, A/R, A/P, project accounting, and reporting. We used our internal case study, which evaluates accounting software across 15 areas, as follows:

Frequently Asked Questions (FAQs)

Does FreshBooks allow you to upload and reconcile bank statements manually?

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How much does Xero charge?

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Does FreshBooks offer a mobile app?

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Bottom Line

FreshBooks and Xero have their strengths and uniqueness, but Xero takes the win in our comparison. Both have features that can help you and your business manage accounting transactions properly. FreshBooks is the better choice for freelancers and service providers. Its features combine project management and accounting with helping professionals self-manage their business. It also has flexible pricing, which is cheaper than Xero if you only need one or two users. If you intend to expand your business, it has a custom plan to match your needs.

Xero is a more popular name in this industry, and it’s the better choice if you deal with inventory. It has a more comprehensive set of features than FreshBooks, including financial reporting and analysis. Choose Xero if your specific accounting needs aren’t present in FreshBooks, such as more advanced A/P features.

Visit Xero

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User review sources:

^[1]FreshBooks | GetApp
^[2]FreshBooks | G2
^[3]Xero | Software Advice
^[4]Xero | G2