FreshBooks vs Xero: How They Compare in 2023

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 has more accounting features, making it an excellent choice for growing businesses, especially product-based companies.

FreshBooks vs Xero At a Glance

When To Use

Fit Small Business Case Study

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 focuses on being user-friendly and lacks some of the more sophisticated features included in Xero, such as inventory and fixed assets. On the contrary, Xero is very sophisticated and harder to use. The difficulty in using Xero compared to FreshBooks is compounded by a lack of customer service. Let’s dig deeper into FreshBooks and Xero in the subsections.

FreshBooks vs Xero: Pricing

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

FreshBooks offers many more discounts than Xero, and it wins here in terms of pricing since it offers significantly affordable pricing plans compared with Xero. However, since FreshBooks charges $10 per additional user, per month, it can quickly become more expensive than Xero if you need three or more users.

FreshBooks vs Xero: Features

FreshBooks falls behind Xero in terms of general features because it trades advanced features in favor of ease of use. 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 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.

FreshBooks Tiered Features Table

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Xero Tiered Features Table

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Banking & 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 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 to subtract 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, whereas 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.

Invoicing (A/R)

Both FreshBooks and Xero have good invoicing capabilities, but FreshBooks offers more customization options. Functionality-wise, Xero’s invoicing is great except that it doesn’t enable users to customize the aesthetics, such as colors, of the invoice. The two programs can also set up recurring invoices,

They also performed well in our evaluation for A/R management. You can set sales prices, create customers, email invoices, accept short payments, and manage customer accounts in both FreshBooks and Xero.

Accounts Payable

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 ideal 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.

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

Project Accounting

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 in both FreshBooks and Xero, 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 cost to a project, which is expected since FreshBooks doesn’t provide inventory accounting.

Reporting

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 subaccounts.

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.

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 much 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

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Xero Ease of Use

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FreshBooks vs Xero: Integrations

FreshBooks integrates with several apps commonly used by small businesses, but its integration options aren’t as vast as Xero’s. All are 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 and 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)

Meanwhile, Xero has its App Marketplace, wherein users can connect different third-party apps. It showcases various third-party apps that seamlessly integrate with Xero’s environment.

Listed below are the categories and some apps that fall under each:

• 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 and 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)

FreshBooks vs Xero: Mobile App Functionality

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, and 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, 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 also 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.

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 the service.

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’s pricing starts at $299 per month.

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’s monthly pricing starts at $299.

FreshBooks vs Xero: 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’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.

FreshBooks vs Xero: User Reviews

Both FreshBooks and Xero scored high with users. FreshBooks users appreciate that it’s one-stop accounting software that’s easy to set up and use. Reviewers also praised its project tracking features and how easy it is to invoice clients if you use the project feature. The software’s biggest drawback is its inability to manage inventory, and users wished that FreshBooks had a live chat feature.

FreshBooks earned the following average scores on popular review sites:

• G2: 4.5 out of 5 based on about 650 reviews
• GetApp: 4.5 out of 5 based on around 4,000 reviews
• TrustRadius: 8.2 out of 10 based on about 200 reviews

Meanwhile, users who left Xero reviews said that the software is easy to set up and use, adding that it has a simple and clean user interface along with intuitive features. Some also praised its fixed assets manager and project accounting capabilities. However, its inability to reconcile transactions without bank feeds and its lack of live phone and chat support are its biggest drawbacks.

It earned the following average scores on popular review sites:

• G2: 4.4 out of 5 based on more than 500 reviews
• GetApp: 4.4 out of 5 based on around 2,400 reviews
• TrustRadius: 8.7 out of 10 based on about 570 reviews

How We Evaluated FreshBooks vs Xero

We evaluated FreshBooks and Xero based on ease of use, pricing, and how well they performed against the ideal features we’re seeking, including project accounting, inventory management, and mobile accounting. Our evaluation was based on a rubric scoring methodology in six categories, each with a designated appropriate percentage.

Our criteria for choosing the best small business accounting software are as follows:

FAQs

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

No, it isn’t possible to reconcile bank statements manually in FreshBooks because it doesn’t allow you to upload files of transactions unless you connect your bank account.

How much does Xero charge?

Xero offers a choice of three subscription plans, which range from $13 to $70 per month. Regardless of which subscription you choose, you’ll have access for unlimited users.

Does FreshBooks offer a mobile app?

Yes, FreshBooks offers a robust mobile app for both iOS and Android users. It lets you enter bills, accept payments, issue invoices, and capture expense receipts.

Bottom Line

FreshBooks and Xero have their strengths and uniqueness. Both have features that can help you and your business manage accounting transactions properly. 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 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.