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What is Xero Accounting?

In today’s fast-paced business world, leveraging the right accounting tools is crucial for growth and efficiency. Among the top choices available, Xero accounting software stands out as a favorite for small and medium-sized businesses (SMBs) around the globe. But what exactly is Xero? And why has it become so popular among entrepreneurs and finance professionals?

In this article, we’ll dive deep into Xero’s features, benefits, and why it might be the perfect solution for your business.

What is Xero?

Xero is a cloud-based accounting software platform designed for small businesses. Founded in New Zealand in 2006, it has grown rapidly and now serves millions of users worldwide. Xero provides businesses with real-time access to their financial data, allowing for better decision-making and streamlined operations.

One of Xero’s key selling points is its user-friendly interface, combined with powerful features that make accounting simple, even for those without a financial background.

Source: Xero Official Website

Key Features of Xero Accounting Software

Xero offers a wide range of features tailored to meet different business needs, including:

• Real-Time Financial Reporting: Monitor your cash flow, expenses, and revenue at any moment with live data updates.
• Automated Bank Feeds: Connect your bank accounts to automatically import and categorize transactions.
• Invoicing and Billing: Create professional invoices quickly and track payments with ease.
• Payroll Management: Handle employee payments and tax filings directly within the platform (available in select countries).
• Inventory Tracking: Manage your products and stock levels efficiently.
• Third-Party Integrations: Seamlessly connect Xero with over 1000+ apps including CRM systems, e-commerce platforms, and point-of-sale tools.
• Mobile App Access: Manage your business finances on the go with Xero’s intuitive mobile apps.

Source: Xero Features Overview

Why Choose Xero for Your Business?

There are several reasons why businesses choose Xero accounting software over other options:

• Ease of Use: The clean, intuitive dashboard makes it easy for non-accountants to manage their books.
• Cloud-Based Access: Work from anywhere, at any time, and collaborate with your accountant or team remotely.
• Affordability: Xero offers flexible pricing plans to suit businesses of all sizes.
• Scalability: Whether you’re a freelancer or managing a growing company, Xero adapts to your needs.
• Strong Security: Xero uses industry-standard encryption and secure data centers to keep your information safe.

Xero Pricing Plans

Xero offers three main subscription plans, making it accessible for businesses at different stages:

1. Starter: Ideal for sole traders or small businesses.
2. Standard: Best for growing companies needing more features.
3. Premium: Designed for larger businesses with multi-currency needs.

Prices vary by country, so it’s best to check their local pricing page: Xero Pricing.

How Does Xero Compare to Other Accounting Software?

When compared to competitors like QuickBooks Online, FreshBooks, or Sage, Xero holds its ground with several unique advantages:

• Unlimited users on all plans (unlike QuickBooks which often charges per user).
• Better integration ecosystem for specific industries.
• Superior customer support reputation.
• More intuitive mobile experience.

That said, the best choice depends on your specific business needs. Xero is particularly praised for service-based industries and companies that value collaboration.

Source: Forbes – Xero vs QuickBooks Comparison

What is Xero Accounting? 10 Facts About Xero Software You must Know in 2025

Every business needs to keep on top of its finances.

Ensuring you are in control of what’s going in and out of your small business’s bank account is critical to survival. 

So, how you will handle the bookkeeping of your small business?

There’s the option of using software, but many accounting software have a steep learning curve and expensive.

And for small business, which is low on funds, you must get the most bang for your bucks.

So, what a small business can do to handle its finances without breaking the bank?

The solution? Xero accounting software!

If a small business is looking to take on accounting tasks themselves, then Xero is a cloud-based accounting software made for those small businesses.

What makes Xero a good choice?

Many business owners find the Xero user interface customer friendly and easy to navigate. 

Since Xero is cloud-based, you can access it from wherever you want, whenever you want, without being limited to a single PC.

Xero accounting software can be accessed on your Smartphone and does not require any type of IT maintenance or software installation.

To get started with Xero, all you need to do is purchase the monthly package as per your small business needs and then insert the username and password.

Any information you add or change can also be accessed by other users when you add them to the user’s list.

• A Clear Business snapshot

One of the most excellent benefits of Xero software is that it provides a clear financial overview of your business on one screen- A business snapshot.

You can access this report here: Accounting>Reports>Financials>Business snapshot.

Business snapshot is the single most important financial report for you if you are a business owner or key decision-maker.  Yet, it is the most underused Xero report.

A picture is worth a thousand words. You can see 5 charts on a single screen- profitability, efficiency, financial position, income, and expenses. You can also see the average time it takes to receive cash and the average time it takes to pay your creditors. By using this, you can compute your business’s cash cycle!

Once bookkeeping is complete, you should be checking this page at least once a month.

• Xero dashboard

Xero’s dashboard provides quick links to the most crucial parts of your business’s accounts and also provides you with a snapshot of overall expenses, bank balances, creditors, and debtors.

The dashboard is the default landing page; however, did you know that you can customise what to include on your Xero dashboard?

What does Xero Dashboard include?

Dashboard, by default, has 6 sections:

1. Bank accounts- it lists all the bank accounts connected with Xero
2. Cash in and out – a Histogram of cash in and cash out
3. VAT return– this will show how many days before a return is due
4. Account watchlist- list of individual ledger codes selected to view here
5. Invoices owed to you- Unpaid invoices
6. Bills you need to pay- Unpaid bills
7. Expense claims- expense claims launched by employees

You will find a customise option at the bottom of the page to customise the information to your liking by arranging the different cards around. This will make a more personalised experience.

Xero can be modified to fit all your business needs perfectly.

• Use Hubdoc

Xero completed the purchase of HUBDOC, a data capture tool, in 2018. It is included in all business editions free of cost. 

Hubdoc integrates with Xero perfectly.

HUBDOC also has an app. You can now scan a bill or receipt, and HUBDOC’s Optical Character Recognition (OCR) will automatically fetch all relevant data. It saves time on bookkeeping and reduces the chances of errors.

This way, HUBDOC also acts as a second layer of control- first, you check in Hubdoc and secondly in Xero.

• Create and track invoices easily

Those days are gone when businesses used Excel spreadsheets to track all incomings and expenses and then create invoices in a Word Document.

With Xero, your invoices are not only customised for your business needs but creating, and tracking those invoices is also fast and straightforward.

You can also create multi-currency invoices, and Xero will keep track of exchange gain/ loss resulting from movement in foreign currency.

All you have to do just a few clicks, and you can easily create an invoice on your PC or mobile device for a client and then email it.

As soon as you create the invoices, they are recorded and saved, making tracking payments so easy.

One of Xero software’s best features is that the invoices can be “payment-enabled.”

So once it is received, the customer can click and pay immediately with any major credit card.  

This allows outstanding receivables, instant reconciliation of customer payments, and quicker cash flow in your Xero register.

You can also create recurring invoices in Xero.

• Automated daily bank feeds

A great convenience in Xero is that you can link your bank account to the Xero software.

This feature will allow a business owner to set up a bank feed that automatically updates and imports your bank statements to Xero Software.

This daily bank feeds mean the immediate tracking of sales invoices, which matches payments against purchases, thus reducing the bookkeeping time and costs.

Again, with technology comes certain risks. It is an excellent practice to keep reconciling your Xero bank balances with your bank account every month. Sometimes, Xero can skip a transaction or two!

• Payroll and pensions

Xero payroll feature will allow you to track, manage and process staff pay and pension in one place.

Xero also provides access to employees so they can request leave online and submit timesheets.

Besides, You can manage and modify any aspect of your payroll and pension using Xero payroll. The information can be sent directly to HMRC or pension bodies from the system, removing yet another job from your ‘to do’ list.

• Free product updates

Another great benefit of Xero software is that when an update comes out, it pushed to all users immediately without the need to wait for a download to your PC, install the latest version, and then restart it.

In the case of Xero accounting software, they release new product updates frequently and are already installed the moment you log in.

• Xero learning

Within my Xero section, you will find unlimited resources to master using this software, and there are many on-demand video, article and very active Xero community and support here.

• Marketplace

Xero has a very active app marketplace. You can connect your favourite apps directly to Xero, like payment gateway, CRM, time tracking tools, inventory and much more.

• Interactive credit control

Last but not least, Xero makes it easy to manage sales invoices with the use of many graphs and diagram options.

Plus, Xero even allows you to share financial information with your professional advisors and colleagues, and the best part of it is that there are no limits on users.

You can add as many users as you need without having to worry about paying extra.

How can Xero help run your small business?

Once you’ve your bank feeds working and have reconciled transactions, you’re ready to explore all the reports available to you.

The following reports are just an overview of those available:

• Balance sheet
• Profit & loss
• Cash summary
• Account transaction
• Budget manager
• Statement of cash flow

All the Xero reports have fully customisable features, which enable you to run a report in seconds for whatever period you need.

All the reports are printable and can be exported to PDF, Excel or Google Sheets.

How much does Xero cost?

No matter how your small business grows or what your small business is, Xero pricing plans will fit your every budget. Xero updated its pricing in late 2023.

Xero accounting UK comes up with starter plans beginning at just £15 per month and standard plans going for as little as £30 per month; there’s something for every budget and price range. The premium plan is £42 per month and includes multi-currency functionality. All prices are VAT exclusive.

But each price range offers various features.

For example, the £15 starter plan gives you a monthly limit of 20 bank reconciliation, 20 invoices, and 5 bills, while the £30 plan contains unlimited transactions, unlimited bills and unlimited invoices.

Premium Plan includes everything in standard plus multi-currency options.

Besides, Xero also provides optional extras such as:

Expenses: get the first three months free for 1 user, then £2.50 per month + £2.50 per additional user.
Payroll: get the first 3 months free for up to 5 employees, then £5 per month + £1 per additional employee.
Projects: £5 per user per month + £5 per each additional user.
Analytics: £5 per month.

What support is offered for Xero?

Xero has a complete set of support features, including video tutorials, FAQs and online customer support.

But it currently doesn’t have a live chat function or phone inquiry support.

This means that solving a query regarding any issue can take a few hours.

Final Thoughts: Is Xero Right for You?

If you’re looking for a powerful, easy-to-use, cloud-based accounting solution, Xero accounting software could be the perfect fit. With its comprehensive features, excellent integration options, and user-friendly design, Xero helps businesses save time, reduce errors, and gain deeper insights into their financial health.

Ready to streamline your accounting process?
Try Xero for free today!

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