Business Owners Guide to: QuickBooks Online vs Xero (Canadian Edition)

The benefits of cloud accounting are becoming clearer to business owners: access to data anywhere, efficiencies in automation, efficiencies in integrations to POS systems, lower cost of bookkeeping.  Business owners are turning to cloud accounting as the answer, but when it comes to cloud accounting software there are two major players in Canada – so how to choose?  Here is a fully comprehensive guide to QuickBooks Online (QBO) vs Xero (Canadian Edition) from the perspective of a business owner.

Want to skip the details? Scroll to the bottom for a summary.

Initial Setup

QuickBooks Online is owned by Intuit, a rather large company that seemingly operates their Canada division in what seems to be a bit of a silo from the US.  QBO Canada and QBO US are totally different, and if you make the mistake of signing up for the wrong QBO account, you’re left having to re-do everything.

QBO and Xero have both created a step-by-step setup in the format of a survey.

QBO’s survey is a simple two steps.  The second step of this survey (below) seems really daunting.  It feels like you’re back in high school and you need to select your destiny right now.  In fact, this step is just a waste of time.  Your answer to this question is to help QuickBooks learn more about their own software and seems to be irrelevant to the setup.

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The bulk of the setup in QBO is not in a survey format and looks more like this below.  Notice how setting up a chart of accounts, setting up taxes and setting up opening balances are not part of this guided process.  As an accountant, that boggles my mind.  QBO has in the past year removed their default chart of accounts, which allows for more flexibility in creating a custom chart of accounts but seriously, what small business owner has the time to create a chart of account from scratch?  Don’t know what a chart of account is?  Most small business owners don’t either, so good luck asking them to build one from scratch.

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The Xero setup process is smoother and is more comprehensive while at the same time allowing users to skip steps that cannot be completed immediately.  An improvement to this setup process is to be able to more easily be able to get back into the setup at a later date.  During the process step, you are asked to select the country in which the organization will pay taxes.  Now, isn’t that intuitive?  Here is a screenshot:

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Xero is the winner for this one, hands down.

Price

Without going into the detailed pricing plans for each software, the retail price of QBO and Xero are very comparable for small business owners.  Keep in mind that Xero invoices in USD, which is annoying for Canadians who want to pay in CAD.  It’s still comparable and so I declare this one a tie.

Invoicing and Payments

Creating and sending invoices to clients is simple to setup in both software.  Customization for invoicing is available in both software.  Payment processing fee options for both software is also comparable.

While both software allows for the integration of payment processing information, what this section will cover is the simple case of using the cloud software to invoice a customer using the software and offer the customer the ability to pay the invoice by credit card.

QuickBooks offers built-in payment processing whereas Xero allows users to connect to a variety of payment processors including Stripe, PayPal and Square to name a few.  While the built-in setup process for QuickBooks is much simpler, I found that QuickBooks as a company is terrible to deal with for matters of payment processing.  Without going into too much detail, their merchant service support line is horrendous to deal with.  QuickBooks payment processing also falls short when it comes to allowing users to invoice and accept payments in non-local currency.  By not offering a seamless payment processing integration options for invoices created within the software, QuickBooks falls short here.

So while it takes a few extra steps, seamless integration with a more established payment processor such as Stripe, PayPal and Square can offer less administrative headaches.  Xero takes this one.

Payroll

Similar to the merchant payment processing option, QuickBooks Online offers a built-in payroll option, while Xero does not.  That said, both software offers integrations to a number of fantastic cloud payroll providers.

The QuickBooks payroll option in Canada is just not competitive in terms of features.  Since QuickBooks does provide an option to run a built-in payroll module it gives users an added option to easily setup and run payroll within the cloud software.  Unlike with payments, QuickBooks offering this option does not take away from its ability to also integrate smoothly with an external payroll software.  QuickBook wins in the category of payroll because it is able to provide additional options (both a built-in option and integration)

Bank Reconciliation

Bank reconciliation in Xero and in QuickBooks is typically the first major difference that a bookkeeper will notice.  For the purposes of this blog, I will not be elaborating and will assume that the business owner has a bookkeeper and/or accountant.  Both software can perform bank account reconciliations in a similar manner by pulling in bank transaction data automatically from bank feeds and creating reconciliation rules.  From the perspective of a small business owner, let’s call this one a tie.

Financial Planning and Analysis

A simple look at both QuickBooks Online and Xero from a business owner perspective would show that both software has a number of standard reports for financial analysis, management of receivables and payables, and simple inventory tracking.  The software even allows users to load a simple annual budget, which allows for some simple tracking to budget.

Want to create custom income statement and balance sheet reporting?  Xero has a drag and drop interface that will allow for custom categorizations of accounts and save it in a template.  Xero also allows for multiple report templates to be saved.

As an organization begins to grow, its needs for financial reporting and analysis will also inevitably become more complex. A business owner needs to keep scalability in mind.  What becomes more important is not the canned reports provided, but how easily data can become exported in standardized formats.  Being able to export a flat list of data makes it easy to analyze a subset of data or even use the subset of data to help develop a more accurate forecast.  There is no contest in this category as it is much simpler to pull flat data files from Xero than from QBO.  Xero is the winner for financial planning and analysis.

Taxes

With the ability to pull GST/HST reports in summary and by detail with form line number references, ability to submit GST/HST reports directly from the cloud interface, ability to assign GIFI codes to accounts and even a brand new development to create and file tax returns, QuickBooks Online is the winner in this category by far.

This very straight-forward GST/HST report can be generated by business owners to submit their own GST/HST reports.  All of the tax line items are provided, which makes the filing process that much easier.

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Xero tax reports are generic and likely because they have not been as established in the North American market for as long.  Xero tax reports are adequate to create an HST report and also to create financial statements that can be used to file taxes, however they are more like a data dump than actual tax reports.

Support

QBO has a customer service telephone call centre with very reasonable wait times.  Their customer service line provides excellent service, especially for basic how-to questions.  When it comes to more complex issues and inquiries into software glitches, this is where their call centre is not so helpful.  They have an escalated helpdesk with only outbound calling capability and they will call at random unscheduled times, just like the guy that fixes your cable.

Xero does not have a customer service line, but it does have a support e-mail that responds very quickly and is able to provide a high level of support remotely.  Xero also has a function to invite your customer support agent to your organizations so they can see what you are seeing.  This saves time because then you don’t have to do a screen sharing session on the phone.  I’ve found the Xero support to be very competent.

QBO and Xero both have a database of accountants that support their software so small business owners do not have to deal with this entirely.  I’m giving this one to QBO, because I understand the need for business owners to want to pick up the phone and call and speak to a real person.  I’ve also seen a formidable effort by QBO to connect to small business owners in real life through conferences and help connect them to bookkeepers and accountants.

Integrations / Apps

This blog article compares Xero and QBO side by side without the use of integrations to other applications.  The real power of cloud accounting is its ability to connect to powerful apps.  While many cloud accounting apps connect to both Xero and QBO, there are some that only connect to one.  A deciding factor of which software to choose is whether it has a certain app.  For example, a client of mine uses a specific real estate cloud system that only connects to QBO and not Xero.  In this case, it is clear that if they want to upgrade their accounting system to cloud, it would be much easier for them to pick QBO.

Both Xero and QBO have a strong app community and continue to encourage developers to use their software.  They both have sites that support the app community and allow for apps to be rated by users and for users to share their experiences with various apps.  It would be interesting to see how this continues to build out in the coming years, but for now, this is a tie.

Overall Ease of Use

Both QBO and Xero were designed with small business owners in mind.  Everything is designed to be click-button friendly, and there is no real need to understand debits and credits to use the basic functionalities of either platform.

QBO had an edge on menu layout as it has this really easy + button on the top right of the screen that allowed users to intuitively add new invoices, expenses, sales receipts, credit memos etc. without toggling between different screens.  As of earlier December 2018, Xero has entirely ripped off this layout.  Xero generally runs a lot smoother and has less lag and glitches.  The lag issue in QBO is one that I hear across the board from all users.  The load and refresh time is significantly slower in QBO than it is in Xero to the point where productivity is impacted.  I’m giving this one to Xero.

Summary

Feature Winner Comments
Initial Setup Xero Xero offers an easy setup wizard and a nice default chart of accounts
Price Tie Both products are priced similarly, Xero pricing is in USD
Invoicing and Payments Xero Xero offers seamless integrations with popular payment providers
Payroll QuickBooks QuickBooks offers the option of built-in payroll
Bank Reconciliation Tie Both software perform bank reconciliation with automated bank feeds
Financial Planning & Analysis Xero Xero offers easy drag and drop custom reports and clean data exports
Taxes QuickBooks QuickBooks produces summarized tax reports to easily fill tax forms
Support QuickBooks QuickBooks offers a live customer support line while Xero support is more competent, live customer support is what small business owners want
Integrations Tie Both offer a slew of app integrations
Overall Ease of Use Xero Less of a laggy experience, less glitches

Each of these tools has its own strengths and weaknesses.  From a small business owner perspective, I find that QuickBooks offers an all-encompassing solution that is more suited for small businesses that needs something simple.  It also offers a familiar product that many bookkeepers and accountants in North America are used to. For small business owners who have aspirations to continually scale and improve the efficiency in which they do things, I find that Xero is a great option.  As a forward-thinking accounting professional who continuously strives for continual efficiencies, Xero is typically my software of choice in most cases for the reasons in this blog article and for a slew of other more technical reasons that have not been covered.

I tried Grammarly for a month

Grammarly has changed the way that I work

Grammarly is a Chrome add-in that has changed the way that I’ve worked.  I’ve been trying Grammarly for almost a month now. While I feel that I am an advanced writer, I was surprised to see how many errors I was making without realizing.  I noticed that when I am interrupted often or just don’t have a smooth flow of thought, I sometimes double type words.  Grammarly made me become more aware of this and helped fix these errors in a way that just seemed less annoying than your typical word processor software.

It’s not as annoying as you would think

What I like about Grammarly is that it checks my written emails, messages, tweets, blog posts and even when I fill out surveys.  It basically works with every text field in the chrome browser.  I was initially hesitant about installing Grammarly because I felt that it would be really annoying to be corrected.  It isn’t like the correction feature on your phone, it does not autocorrect your typing, it just underlines errors or potential errors much like a word processing spell check.  While it does underline errors it does not look like the eyesore red squiggly line that you’re used to in a word processor.

It does not correct common short-forms.  An example of this is when I type “thx” in my messages.  I don’t get a red underline for this.  I like that.  I’m not writing a novel when I type and short-forms should and is allowed.

Look at this screenshot!  I love that it did not correct my tweet.  I would have been so annoyed if they highlighted my smiley face.  Thanks for understanding Grammarly.

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Our entire team is now on Grammarly.

It’s not perfect

Like any spell check and grammar check, it isn’t perfect.  It’s not going to pick up on all errors.  If I use a word in the wrong context, it isn’t going to pick up on that.  I imagine that it follows some sort of algorithm for grammar and look-up for spellcheck.  I still think it’s great though.

Not a fan of the phone app

I really was so impressed with Grammarly that I decided to check out the phone app.  They have a downloadable keyboard app that installs like any other non-native keyboard app.  I have an android phone and it was easy enough to install.  I immediately uninstalled it when I realized that it does not allow for swipe typing.  I am a swipe typer and so I just couldn’t live with that.

If you would like to try Grammarly, click here to give it a go.

 

Your Start Up and E-Commerce Accountant

Jenny Tran, CPA, CMA

@fintcloud

 

New business? How to look established.

Your company’s image and how your target market perceives you as a company is so important.  This is something that needs to be considered from business inception.  Faking it until you make it can bring you further as a company – have you watched Leonardo Dicaprio in The Wolf on Wallstreet?  At the very least, taking some small steps can make your company seem more organized and makes it easier for customers to trust your company.

Below are a few ways to make your new business seem established without any large upfront fees.  All of these suggestions that I am making are things that you will eventually need anyway and will make your business look more established right away if implemented on day one.

You need a website

I’ve connected with new business owners, who talk excitedly about their business and just as I get intrigued and ask to see their website, they tell me they don’t have one.  My saying is that if you don’t have a website, you don’t have a real business.  There are so many services to create a website, but if you are lost, let me help you with a recommendation: Blue Host.  Blue Host has an easy integration with WordPress.Org which has a ton of different plug-ins that makes it easy to create a website.

If you don’t have a website, how can prospective customers of your service or product see what you are able to provide and/or how to find you?

Don’t use a free e-mail service

Nothing screams amateur and unestablished like a @gmail.com, @hotmail.com, @yahoo.ca and don’t even get me started with a @sympatico.ca e-mail.

My firm uses GSuites to host our e-mail.  It also brings together all of our calendars and allows us to share calendars easily.  There are a slew of tools that come with GSuites that I use on a daily basis for my business.  I’m not sure how I can run a business without GSuites.  I like that every time I sent out an email, I am promoting my business brand.

Does setting up an e-mail address with your personalized domain seem too daunting?  Contact us, and we can refer you to someone who can help set you up.

Accepting electronic payments

If you are accepting cash-only for your business, you are more than likely turning away potential clients.  If you are accepting personal e-mail money transfers, this can look unprofessional and can make your business look less established (not to mention create a bookkeeping nightmare).

There are many ways to accept electronic payments from customer.  There are many solutions out there for payment processing that can process credit card payment to direct debit payments.  I will do a separate article on electronic payments, but if you need some help with this you can contact us to get setup.

Your Start Up and E-Commerce Accountant

Jenny Tran, CPA, CMA

 

Preparing for Small Business Growth

Our business is growing and there is just so much to learn along the way.  We want to share some tips and tricks for managing a growing business.  There are three topics that is relevant for every growing small business: staying organized, mental health and appreciating employees.

 

1. Staying Organized

A company with just one owner might be able to get away with mental notes or just a simple notebook, but a growing company needs to be aware of what it means to stay organized at different sizes.

When we were just one, it was just a notebook.  Then we became three, and we started using Trello to manage tasks.  I highly recommend Trello, but we’ve grown out of it and now we started using a more robust tool called Karbon HQ that also allows us to track each other’s e-mail trails.  This journey would look different for different types of small businesses, but the underlying theme of proactively seeking the right tools is one that every growing business needs to consider.

At what point does one need an administrative assistant? This was a big question for me as of late.  We’ve been using Calendly to manage the need of having to coordinate back and forth the question of, “So, when can you meet?”.  It was fantastic, until I realized that it cannot make appointments, or make judgemental decisions on the priority of a meeting over another.  Personally, I made the decision that when my calendar became so full that it became a matter of having to decide which meeting is more important than another.

2. Mental Health

Most entrepreneur would agree with me that staying healthy mentally is something that needs to be proactive.  I don’t think the typical person appreciates how many decisions a business owner needs to make in a day, and how mentally exhausting it can be.

It is our responsibility to take care of ourselves.  My advice is to surround yourself with people who at the very least can sympathize with why you might immediately book a direct flight that costs more to having to check flight prices everyday, or stress out over connecting flights.  Making reasonable choices to avoid unnecessary stress is sometimes more important than saving a few dollars.  Yes, I’m an accountant and I actually said that.

Most recently, I’ve discovered how difficult it is to just look at my phone and not be immediately stressed out over the volume of notifications.  I thought it was normal until my friends started mentioning to me that they get stressed out over my notifications even when I ignore them.  I’ve now manually turned off notifications on almost all apps now.  I’m also trying out a meditation app called Calm.

3. Appreciating Employees

I used to work for big corporations prior to becoming an entrepreneur.  Big corporations are known for having disgruntled employees, and I admit to being a disgruntled employee at one point in my life.  Rather than hold a grudge, I take it upon myself to never forget how being unappreciated made me feel.  As hard as I may be on my employees sometimes, I will always try my best to appreciate them.  Many of my employees are young and new to the working world.  They probably have not seen how an unappreciated team with poor communication can quickly deteriorate.  I realize that having zero disgruntled employees can be difficult as a company grows, but do I take it upon myself to take preventative action.

We encourage open communication channels, welcome informal feedback and most recently we introduced an appreciation program using HeyTaco, a Slack integrated app.  Appreciating employees is something that needs to be ever-evolving and re-assessed from time to time for a growing company.  It should not be just a program that is implemented and forgotten.

 

Your Start Up and E-Commerce Accountant

Jenny Tran, CPA, CMA