Xero accounting software pros and cons

Even though Xero commands such a large market share all over the world, like every other software, it has its own strengths and limitations. To give you an insight into what it can offer to your business, here are the pros and cons of Xero.

‘The best at what it does’

Xero is a web-based accounting system designed for small and fast-growing businesses.

Described as ‘affordable professional-level accounting software for small businesses’ and ‘the best at what it does,’ it’s no surprise that the software has over 1,000,000 users and is the primary accounting solution for over 16,000 accounting firms.

According to your specific business needs, Xero can either save you heaps of time, energy, and money, or it can end up causing you more hassle than it’s worth. See the pros and cons below to make your own judgement.

Pros of using Xero

  • Cloud-based so no downloads or installation required.
  • Relatively easy to use and you’re connected with your own advisor.
  • Cost-effective and offers a free 30-day trial so you can explore before you buy.
  • Clean interface which gives you instant visibility of your financial position.
  • Real-time bank feeds and bank reconciliation.
  • Offers a capable estimating/quoting/order process that ties into AR invoices smoothly.
  • Provides you with unlimited users.
  • Built-in payroll with automatic superannuation payments
  • Can manage personal expenses with mobile review and approval of each receipt.
  • Easy access to the same files as your clients.
  • Can be accessed from any device with an active Internet connection
  • Easy integration with third-party apps and plugins.
  • Constantly upgrading with better features which update automatically.
  • Is very scalable so it will grow with your business.
  • Saves you time and money.

Cons of using Xero

  • Although easy to instal, it takes some time to learn how to use it.
  • Recently increased its prices and no longer includes built-in payroll with its plans.
  • The requisition/purchase/inventory side is very, very basic.
  • Limited expense claims, projects, and multi-currency support to the most expensive plan.
  • No built-in ‘Debtor Chasing’ function so businesses will need to manually follow up on unpaid invoices.
  • Doesn’t support Exchange Trade Products (ETPs).
  • Can be very slow if your company is running online or if it makes a high volume of sales through PayPal.
  • Poor customer service (takes time and can be met with unhelpful advisors).


Always take into account the pros and cons of Xero before investing

It may be a professional double-entry accounting software at a very affordable price but consider all the pros and cons of Xero before investing in it. Choosing the right software for your business can drive it forward, so the decision should not be taken lightly.

To make sure that you choose the right one for you, always speak with your accountant and/or a Xero consultant to evaluate your suitability for the application first. Only when you do this can you invest with realistic expectations and get the best bang for your buck.

Xero is a cloud-based accounting software product that lets small-business owners manage their finances from anywhere and integrate with more than 1,000 apps. It’s less expensive than competitors like QuickBooks Online and doesn’t charge extra for additional users, making it an affordable option for growing businesses.

Xero Accounting

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NerdWallet rating 

NerdWallet’s ratings are determined by our editorial team. The scoring formulas take into account multiple data points for each financial product and service.

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on Xero’s website



  • All plans support unlimited users.

  • All plans include basic inventory management.

  • Automated bill and receipt capture through Hubdoc.

  • No live phone support.

  • Limits on bills and invoices with the entry-level plan.

Deciding factors


$12 per month and up.

Maximum number of users


Ease of sharing with accountants

Good. You can add your accountant through email and assign them advisor permission. Xero has more than 3 million subscribers globally but is not as widely used as QuickBooks is in the U.S., so it may take more time to find an accountant who is familiar with it.


Good. Xero has three plan tiers for sole proprietors and very small businesses, growing businesses and established businesses.

Ease of use

Excellent. Xero has an intuitive flow and offers a set of recommended online courses to help get you started. Online bank feeds and suggested transaction matching make reconciling easy.

How does Xero work?

After you start a free 30-day trial of Xero, you’ll activate the account and provide details about your business. Then, you can connect your bank accounts to Xero and decide if you’ll accept electronic payments via online invoices.

When reconciling books, Xero suggests likely matches between bank statement lines and transactions entered in the software. For example, if you have an entry for an invoice of $1,000 and a recent $1,000 deposit in your bank account, it might suggest matching these two transactions. Click the “OK” icon between the two to verify the match is correct.

You can also scroll through Xero’s default chart of accounts and customize it as needed, or import an already existing chart of accounts. If you have a list of customers and suppliers, you can import that, too.


Promotional discounts may apply. Xero lets new customers sign up for a 30-day free trial to test out its features. You can add Gusto payroll to any plan for an extra $40 per month, plus $6 per month per person.





$12 per month.

  • Send quotes and up to 20 invoices.

  • Enter up to five bills.

  • Automated bill and receipt capture with Hubdoc.

  • Reconcile bank transactions and set up online bank feeds.

  • Basic inventory management.

  • Reporting.

  • Send purchase orders.


$34 per month.

All features in the Early plan, plus:

  • Unlimited invoices, quotes and bill entries.

  • Ability to bulk reconcile transactions.


$65 per month.

All features in the Growing plan, plus:

  • Works with multiple currencies.

  • Project tracking tools for recording time and breaking down job costs.

  • Claim expenses.

  • Advanced analytics tools for predicting future cash flow, up to 90 days ahead.


Unlimited users

With Xero, you can add an unlimited number of users to your account at each subscription level. This is a notable feature for accounting software; often, lower-tier plans allow fewer users while only higher-tier plans allow unlimited users.

You can also set permission levels for each user. For example, you can give all employees the ability to send quotes and invoices, allow some to pay bills and limit who can see the company’s complete financial picture. To keep things organized, Xero logs every action users make and compiles the history of every transaction.

Customizable reports and dashboards

Xero helps transform the data you enter into actionable information at every subscription level. A dashboard provides a summary of your business’s financial health, including total cash in and out, outstanding invoices and overdue bills. Another page dedicated to short-term cash flow charts out how future bills and invoices can affect your bank balance over the next week.

Reports also are customizable, with adjustable formatting and the option to add your own formulas and groupings. For instance, you can drag and drop certain expense categories into a single subgroup — an “office expenses” subgroup could include office equipment, supplies and utilities. And if you don’t like how the dashboard looks, you can reorganize panels and hide the ones that aren’t useful.

Inventory management in all plans

Unlike QuickBooks Online, which includes inventory management in its $80-per-month Plus plan and up only, Xero offers basic inventory tracking in all plans. Businesses that need to keep count of items can do it within Xero, instead of integrating with (and paying for) a third-party inventory tracking app.

Xero Accounting

Start a 30 day free trial!


NerdWallet rating 

NerdWallet’s ratings are determined by our editorial team. The scoring formulas take into account multiple data points for each financial product and service.

Shop Now

on Xero’s website


No phone support

Xero doesn’t provide a phone number on its customer support page. This is a serious drawback if you want to be able to pick up the phone and talk through an issue or are new to accounting software and have lots of questions.

Instead, the company provides 24/7 online support and will call customers if it’s necessary.

Limits on bills and invoices in the entry-level plan

In the Early plan, the least expensive subscription, you can send up to 20 invoices and schedule up to five bill payments only. That can be limiting, even for freelancers and sole proprietors. For unlimited invoicing and bill-paying capacity, you’ll need to upgrade to the Growing plan.

Xero alternatives

Bookkeeping and accounting software



$15 per month and up.

FreshBooks offers unlimited time-tracking in its lowest-tier Lite plan, whereas Xero users would have to opt into the highest-tier Established plan for that feature.

QuickBooksQuickBooks Online

$25 per month and up.

As the industry standard, QuickBooks Online is ideal if you have a growing business with specific accounting needs — as long as you don’t mind taking the time to learn the program’s ins and outs. Like Xero, it can easily scale with your business.

SageSage 50cloud

$47.25 per month (when paid annually) and up.

Sage 50cloud’s Cash Flow Manager tool is a helpful feature for people who want to better understand how future transactions could impact their business. The tool also lets you adjust the time frame to see how your business has changed over time.

Wave Financial

Free (add-ons available).

Wave is a solid choice for small businesses looking for free accounting software.

ZohoZoho Books

Free and up.

Zoho Books’ paid plans all come with free live chat and phone support. The free plan comes with email support only.

Written by Jane