FreshBooks vs. Xero: How They Compare in 2022

Both FreshBooks and Xero are cloud-based accounting software that operate 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. On the contrary, Xero integrates more accounting features, making it an excellent choice for growing businesses, especially product-based companies.

When to Use FreshBooks

The best features of FreshBooks are its time management, invoicing, and accounting tools—making it simple for tracking billable hours, billing clients using the invoice creator, and tracking your invoices until paid. These great invoicing features earned FreshBooks a spot in our guide on the best small business accounting software. FreshBooks’ features are a great combination of tools for most service-based businesses, especially if they charge by the hour.

FreshBooks offers an easy-to-understand user interface, making it a great option for those with little to no accounting experience.

FreshBooks Is Better For

• Customer service: FreshBooks customer support is commendable because it’s easier than Xero for users to contact the support team for assistance. You can call FreshBooks, let them call you, use a chatbot, or access their self-help information for a quick fix to common questions. Hence, we recommend FreshBooks for better customer support if you’re willing to sacrifice some accounting features.
• Mobile app usage: The mobile app of FreshBooks is one of its strong points over Xero. With FreshBooks, you can track mileage, create invoices, and communicate with clients directly through the app. These features aren’t present in Xero’s mobile app, and we highly recommend FreshBooks for users who are always on the road.
• Individuals with little accounting experience: Although FreshBooks is an “accounting” software, you won’t have a hard time understanding how it works because it’s also designed for people without accounting knowledge. If you don’t want to manage the books yourself, you can invite an accountant to do the books for you.
• Recurring billings: FreshBooks lets users set up automatic recurring billings to customers. It’s our overall best recurring billing software, and it helps service providers bill customers without doing it manually every billing cycle.
• Freelancers offering personal and professional services: FreshBooks offers a convenient accounting solution for freelancers because it has time tracking features to keep track of billable hours and add them to invoices easily.

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When to Use Xero

Xero is our best overall alternative to QuickBooks because of its great inventory accounting, something that FreshBooks lacks.

With Xero’s numerous integration features like PayPal and Square, businesses that rely on third-party software services will find it easy to work with Xero. Whether it’s a third-party invoicing or project management software, Xero’s capability to integrate with many third-party apps makes it versatile and easy to implement in existing businesses. Hence, it’s a practical choice for established small and medium-sized businesses (SMBs) that need essential accounting tools coupled with a vast list of integration features for collaboration and a more efficient workflow.

Xero Is Better For

• Banking: FreshBooks’s banking feature only works if you connect your bank account to the system. With Xero, you may or may not choose to link your bank accounts and cards and instead account for cash transactions manually. Although manual cash accounting can be difficult, some users hesitate to allow their software provider to access their bank account.
• Inventory management: Xero has a full-featured inventory management system that lets you create inventory items, track POs, view inventory costs, account for cost of goods sold (COGS), and check inventory levels. FreshBooks doesn’t have this feature, so we recommend Xero if you’re selling inventory.
• Fixed asset management: Xero has a fixed asset manager that keeps records of your fixed assets, computes depreciation, and records fixed asset disposals. We recommend Xero if you have numerous fixed assets in your business.
• Companies with a large accounting staff: Xero can accommodate unlimited users unlike FreshBooks and other accounting software. Hence, we recommend Xero for businesses with an accounting staff of more than 10 employees.

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When to Use Alternative Software

FreshBooks and Xero showcase features that cater to different needs. FreshBooks has better customer support while Xero shines for its inventory management. However, we recommend choosing another software in the following instances:

• Full-featured inventory management with better customer service: Xero’s inventory features are great, but the software lacks the customer support we want in an accounting software service. Instead, we recommend choosing software that has both, and QuickBooks Online is the best choice. It has live chat support, or you can request a representative to call you. Beyond that, QuickBooks has a plethora of self-help information. Read our QuickBooks Online review for an in-depth analysis of the software.
• Full-featured inventory management with an outstanding mobile app: FreshBooks is our best choice for mobile app functionality, but it doesn’t have inventory management features. If you want both inventory accounting and a good mobile app in one service, Zoho Books is our best recommendation. It earned perfect scores in our evaluation of mobile app functionality. Check out our Zoho Books review and case study for more information.

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We compare FreshBooks and Xero across 11 key areas that we want to see in an accounting software program. You can check out our detailed case study analysis by reading our FreshBooks review and Xero review.

FreshBooks isn’t a full-featured accounting software program, unlike Xero. That’s why FreshBooks lagged in some key areas like inventory and fixed assets. On the contrary, Xero is a dedicated accounting software service, but it fell short in two key areas: customer support and mobile app functionality. Let’s dig deeper into FreshBooks and Xero in the following subsections.

FreshBooks vs. Xero At a Glance

FreshBooks vs. Xero: Pricing

FreshBooks and Xero offer various plans with different features and inclusions.

FreshBooks Pricing

FreshBooks has four different plans. Each plan includes one user and has its specific inclusions such as additional team members for $10 each per month.

• Lite: $15 per month with five billable clients
• Plus: $25 per month with 50 billable clients
• Premium: $50 per month with unlimited billable clients
• Select: Custom pricing option with unlimited billable clients and specialized features

FreshBooks offers 60% off for the first six months and an additional 10% off if you take the annual billing option if you buy immediately. Otherwise, you can try FreshBooks for free for 30 days and choose a plan at regular prices.

Xero Pricing

Xero has three pricing plans which include different features:

• Early: $12 per month with five billable clients and 20 quotes and invoices
• Growing: $34 per month with unlimited billable clients, quotes, and invoices
• Established: $65 per month with unlimited billable clients, quotes, and invoices

Takeaway: FreshBooks offers a lot of discounts than Xero. FreshBooks wins here in terms of pricing since it offers significantly affordable pricing plans compared with Xero.

FreshBooks vs. Xero: Features

FreshBooks Tiered Features Table

Xero Tiered Features Table

FreshBooks vs Xero: General Features

FreshBooks falls behind Xero in terms of general features because the former isn’t a full-featured accounting software service in the first place. Although FreshBooks has double-entry bookkeeping, it misses other important features like adjusting and closing entries, classification of liabilities as to current and long-term, importing a chart of accounts and beginning balances, and setting entity type.

Xero, as a full-featured accounting service, has the majority of general accounting features we’d like to see, and this includes the features we’ve mentioned above that are missing on FreshBooks. However, there are minor features we didn’t see on Xero, and these missing features pertain to note payable amortization. Although it won’t affect the overall user experience, it would be helpful if Xero could generate an amortization schedule for long-term notes automatically.

Takeaway: Overall, we’d give the win to Xero in terms of general accounting features. However, we still see potential in FreshBooks. Since it caters mainly to individuals without bookkeeping experience, its simplistic approach is a wise to move to help freelancers self-manage their books without delving too much into the complexities of bookkeeping.

FreshBooks vs. Xero: Banking and Cash Management

FreshBooks is a bit complicated and limited in its banking features, especially with bank reconciliation. What we noticed is that FreshBooks deducts all manually entered expenses from the Petty Cash account. The only way to assign expenses to the appropriate checking account properly is by matching transactions in the bank feed. Therefore, without a bank feed, you can’t designate which accounts to subtract expenses, making FreshBooks unusable if you have more than one bank account and no live feed established.

Xero’s banking and cash management system allows but doesn’t require a bank feed connection, unlike FreshBooks. With Xero, 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 setbacks mainly focus more on practical expediency. We saw that it’s impossible to combine checks and cash into a single deposit entry. It means that you’d have to record a deposit for purely checks and purely cash separately. As long as you also separate checks and cash in your actual bank deposits, this shouldn’t create a problem as you’ll be able to trace deposits from your books to your bank statement.

Another minor setback in 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.

Takeaway: We recommend Xero for its flexibility in cash accounting and banking. However, we can only recommend FreshBooks if you establish a bank feed connection to your bank accounts.

FreshBooks vs. Xero: A/P

FreshBooks A/P management fared well in our evaluation. Our overview of FreshBooks’ A/P management is basic and direct to the point. You can create vendors, enter bills, set recurring expenses, and record payments. These features are perfect for a freelancer or a self-managing business owner.

On the other hand, A/P management is one of the strongest points of Xero. 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 on Xero because they covered everything from vendor creation to billings management.

In comparison, FreshBooks lacks features if compared to Xero. However, missing features like purchase orders (POs) and vendor credits are forgivable for FreshBooks since they didn’t include inventory management as a feature. Hence, we see a situational approach here wherein we see FreshBooks and Xero’s A/P management as the best in their respective fields.

Takeaway: We’ll recommend FreshBooks to service-based freelancers or self-employed individuals since these individuals don’t need advanced A/P features like inventory POs. Xero is our recommendation if you need to keep track of inventory POs and vendor billings.

FreshBooks vs. Xero: Reporting

Both FreshBooks and Xero offer great reporting features even though FreshBooks is missing some minor functionalities in its reports. Check the table for a comparison of reports available.

Both FreshBooks and Xero have 14 out of 16 reports that we expect to see in an accounting software service. However, some of FreshBooks’ reports seem to lack expanded functionality. For example, the balance sheet of FreshBooks only shows the parent accounts and omits important details like sub-accounts.

Moreover, viewing unbilled charges and time is possible on FreshBooks, but you can’t generate a report for it. Furthermore, Xero’s reporting features are expected with complete functionality like viewing compact and detailed financial reports. Xero reports are comparative, especially for the basic financial statements.

Takeaway: FreshBooks and Xero are great for reporting. We recommend them both in this key area.

FreshBooks vs. Xero: Ease of Use

FreshBooks and Xero aren’t at the same level of difficulty in terms of ease of use. FreshBooks is a lot simpler and straightforward, which is expected since the software caters primarily to people without accounting experience. Xero’s difficulty is average to 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.

FreshBooks Ease of Use

FreshBooks Dashboard

Navigating around FreshBooks is easy because YouTube adjust can find everything on the left-side menu. By clicking on the menu categories, a drop-down menu will appear to show related sub-categories. If you haven’t used FreshBooks before, the setup wizard on the dashboard (see image above) will guide you through the process.

In terms of user experience, FreshBooks isn’t intimidating to people with no accounting experience. The design is clean and well laid out. It’s easy to understand the navigational flow of FreshBooks, and it somehow makes accounting easy for non-accountants.

Xero Ease of Use

Xero Dashboard

Xero can be a little bit difficult for first-timers. As a full-featured accounting software program, there are a lot of features to explore. However, once you get the navigational flow, it’s just a matter of remembering where to find specific accounting information based on the menu categories.

Xero’s user experience is also commendable. Web pages aren’t cluttered, and Xero uses a lot of negative white space so that the web page window can adjust when opening two web browsers during multitasking. It even utilizes the tabular format in most of its modules, making it easy for users to pick up important information without clicking further.

Takeaway: FreshBooks is easier to understand than Xero. However, users with accounting software experience won’t find Xero difficult to use. For people with no accounting experience, FreshBooks is the best software to choose, provided you don’t have inventory. But if you have experience with accounting software services, you can explore Xero.

FreshBooks vs. Xero: Integrations

Xero integrates with more third-party apps than FreshBooks. It has its own app marketplace, wherein users can connect different third-party apps with Xero. However, FreshBooks also integrates with several apps commonly used by small businesses, but its integration options aren’t as vast as Xero’s.

FreshBooks Integration

All of FreshBooks’ integrations are from third-party apps that can help you further streamline your accounting and project management processes. Here are the categories and some of the apps that belong to them:

• A/R (Fundbox, CollBox)
• Analytics (Apipheny and Callexa)
• Bookkeeping services (Bench and Mazuma)
• Client scheduling (Acuity and Calendly)
• Connector tools (Zapier and Syncberry)
• Customer relationship management [CRM] (HubSpot and Capsule)
• Customer support (Freshdesk and Zendesk)
• E-commerce (Shopify and WooCommerce)
• Education (Enlighten.me and Teachable)
• Event management (Eventbrite and Universe)
• Expenses (Everlance)
• File storage (Dropbox)
• Ground mail (Mail Form)
• Inventory management (2Ship and Barcloud)
• Job board (Indeed)
• Lead tracking (123 Form Builder and POWr)
• Marketing (One Local and Sign Post)
• Payments (Stripe and PayPal)
• Payroll (Gusto and KeyPay)
• Project management (Google Workspace and Trello)
• Proposal (Bidsketch)
• Reviews (OneLocal)
• Shipping & tracking (2Ship)
• Tax help (FreshBooks MTD)
• Team communications (Zoom and Slack)
• Time tracking (Boomr and Teamwork)
• Utilities (Todoist and WordPress)
• Website management (Squarespace)

Xero Integration

Xero’s App Marketplace showcases various third-party apps that seamlessly integrate with Xero’s environment. Here are the categories and some of the apps that belong to them:

• Accountant tools (Syft and G-Accon)
• Bills and expenses (Dext Prepare and Xero Expenses)
• CRM (HubSpot and Mailchimp)
• Conversions (MMC Convert)
• Custom integration (3Bit Solutions)
• Debtor tracking (Chaser and Satago)
• Documents (Hubdoc and Google Workspace)
• E-commerce (Quaderno and Rocketspark)
• Financial services (InvoiceInterchange)
• Inventory (SaaSOptics and DEAR Inventory)
• Invoicing and jobs (Xero Projects and Workflow Max)
• Payments (PayPal and Chargebee)
• Payroll & human resources (HR) (Carbonate and HReasily)
• Point of sale (Bold Commerce and Cin7)
• Practice manager (Spotlight Reporting)
• Reporting (G-Accon for Xero)
• Time tracking (Fergus and Deputy)
• Xero HQ apps (Boma and SuiteFiles)

Takeaway: Xero is integrated with more apps than FreshBooks. However, it doesn’t mean that FreshBooks is inferior to Xero. Although Xero has more app choices, the available apps to integrate with FreshBooks are still enough to give additional capabilities and functions.

FreshBooks vs. Xero: Mobile App

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. Internet connection is needed to use the app. Users can add, edit, or remove data through the app.

The FreshBooks app offers a convenient solution because of its invoicing on-the-go feature, which speeds up collections from clients. Moreover, FreshBooks lets you capture your receipts for easy organizing and documenting. The app also has time tracking for billable hours and a mileage tracker via GPS to track your automobile expenses.

The Xero app also has the basic features found in the cloud version, such as invoicing, bank reconciliation, cash flows, profit, and loss. A useful feature in the app 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.

Takeaway: FreshBooks and Xero both have mobile apps that allow you to manage your accounts wherever and whenever. However, FreshBooks offers more mobile app functionality than Xero. We recommend choosing FreshBooks if you do most of your accounting work on your smartphone or tablet.

FreshBooks vs. Xero: Assisted Bookkeeping

FreshBooks and Xero allow assisted bookkeeping services to help small businesses in keeping the books organized. These bookkeeping services aren’t part of the subscription price, and you’ll need to pay an additional fee to get this service.

FreshBooks Assisted Bookkeeping

FreshBooks doesn’t offer assisted bookkeeping services directly. Instead, it has partnered with Bench, an online bookkeeping service that helps you find a bookkeeper. Bench monthly pricing starts at $299 per month.

Xero Assisted Bookkeeping

Xero offers certification programs for bookkeepers and certified public accountants (CPAs). You can hire independent Xero Advisors or integrate with Bookkeeper360 to get bookkeeping assistance. Bookkeeper360 monthly pricing starts at $125 per hour.

FreshBooks vs. Xero: Customer Service

FreshBooks and Xero both have a help center, customer support features, and learning materials to acquaint and guide users in navigating the software.

FreshBooks Customer Service

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

Xero Customer Service

Xero’s customer support is limited. 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. The only way to contact Xero is via email.

Takeaway: FreshBooks has better customer support than Xero. Although Xero has a plethora of self-help articles and tutorials, we still want the comfort of having to call a customer representative to assist rather than interact with a chatbot.

Bottom Line

FreshBooks and Xero have their strengths and uniqueness. They both have features that can help you and your business manage accounting transactions properly. The best software for you depends on your accounting needs and budget.

FreshBooks is the best software for freelancers and service providers. Its features combine project management and accounting with helping professionals self-manage their business. It also has a flexible pricing plan, which is cheaper than Xero. 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 best choice if you want dedicated accounting software for your company. 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 inventory tracking.