The New Zealand-developed Xero accounting application has established itself as a serious contender in the UK market. Nigel Harris puts the latest version through its paces.
Xero.com had been well established for many years in New Zealand and Australia, where online banking is more advanced than in the UK. Having arrived in the UK a few years ago, it is now one of the leading online accounting services, due in particular to it unique automated bank feeds.
Xero is available in three sizes: Small (£12 per month for up to five sales and purchase invoices and 20 bank transactions); Medium (£19 per month for unlimited invoices and bank transaction); and Large (£24 per month, as Medium but with multi-currency).
Accountants can register for the free Partner Edition which enables them to manage multiple clients. Partner accountants can also supply a bare bones VAT Cashbook edition to clients who require only cashbook functionality and can either bundle the cost (£9 per month to the accountant) with their accounting fees or recharge it to the client at their chosen fee level. Accountants receive 25% off the standard price of the other Xero packages if they wish to resell them to clients and manage the accounting centrally.
Target market From start-ups to mid-size enterprises with multi-national customers, suppored only by their accountants.
Cost £12/month Small edition; £19/month Medium; £24/month Large edition. Accountants get 25% discount if they reseell the service to clients.
● Multiple users can be added for no extra cost
● Fast and easy set-up routines
● Dashboard gives a snapshot of bank balances and movements, debtors and creditors, and expenses
● Online data feeds drive bank reconciliation
● Mature VAT facilities, including Flat Rate Scheme
● Includes audit exempt small companies accounts format - no need for accounts production
● No local back-up option; workaround by exporting to Excel
● Default VAT rates may need to be tweaked for different accounts/rates
● Lack of stock and payroll facilities, but can link to third party systems.
For free trial and more info, visit www.xero.com
- Unlike other similar services, Xero customers can create multiple users, at no additional cost, with varying access levels from read-only to full system administrator, giving greater control in multi-user/multi-site scenarios. Accountant Partners can control and issue user accounts for their clients if they wish to retain overall controll.
- Quick, easy opening balances entry under 'conversion data', which automatically posts the double entry to “adjustments” account so you don't need to balance the journal. Can save at any point and return and add to it later. Online help is comprehensive and easy to search, so if unsure you can readily find out how to do something or where to find it.
- Creating the initial chart of accounts is automated and requires little accountancy knowledge. This chart can be edited and added to later. Each account has a default VAT rate which saves time entering data, but need to use with care – it can be easier to have several accounts for the same nominal heading (eg UK sales, EU sales, etc), one for each VAT rate. Accountants may prefer to set this up for their clients before letting them loose on the accounts.
- Creating a bank account is even easier. Just enter the opening balance and you're away. However, if you use online banking you can simply import bank statements as .OFX files (or QIF or CSV, but OFX handles duplicates better).
- The home or Dashboard screen provides quick links to most parts of the accounts, although standard drop-down menus are also available.
- The Dashboard gives a snapshot of bank balances and movements, debtors and creditors, and expenses.
- All users have access to their own data plus a Demo Company, the latter being ideal for practice and learning before entering live data. Demo Company data is periodically reset by the system.
- Where Xero wins against all other SaaS accounting services is the integration of 'live' bank feeds. Register your online banking login and password within Xero and it will automatically download the last day's transaction details from your bank in the early hours of each morning, leaving you to simply code and “reconcile” (ie post) the transactions.
- Xero remembers how recurring transactions are coded so bank data either imported or via a bank feed is partially coded for you to approve or edit and quickly reconcile.
- Xero also integrates with PayPal for online traders and others using PayPal for card sales.
- Other bank and sales and purchase invoice entry are straightforward and intuitive.
- You can create customer and product/service type on the fly, avoiding the need to set everything up in advance. The user can customise the sales invoice layout and print or email invoices, and can have multiple invoice templates, which are selected from the 'branding' drop down when creating a new invoice.
- Bank transactions and invoices can be split across multiple accounts, customers/suppliers and VAT rates.
- Xero handles VAT accrual and cash accounting, either standard method or flat rate. By “publishing” VAT reports when a return is completed, then using the “Period Lock” facility, the user or their accountant can effectively close down a VAT period and prevent transactions being posted to a closed period and consequently omitted from a subsequent VAT return. The VAT reports themselves provide a full audit trail to support the return.
- Xero provides a good selection of standard reports, with multiple customisable parameters (perhaps too many sometimes!). Commonly used reports can be marked as favourites so they appear on the main reports drop down menu, but it is not difficult to select from full list (31 report types are available so full list is displayed on single screen). Reports can be exported to Excel, PDF or Google Docs, and can be “published”, which saves a frozen copy for future reference – very useful for VAT reports - and avoids need to save reports outside the software, which would clearly be less useful for remote access since they would only exist on that local PC.
- A number of reports are only available to the accountant, or a user granted “Financial adviser' permissions. These include a detailed management report comprising full accounts, cashflow summary, debtors, creditors, and an executive summary with key ratios. There is also a basic but impressive audit exempt company accounts report – full and abbreviated – which could be used by smaller firms with uncomplicated clients rather than using separate final accounts software. General ledger can be exported to MYOB, IRIS, APS and in a generic GL format which could be manually imported into other final accounts software.
- While, like most SaaS accounts services, there is no specific local data backup facility, you can do a regular general ledger export to Excel which enables a business to access its accounting data offline if it wished to leave Xero or can't get online.
- Fixed asset ledger, with automatic depreciation
- Inventory list with purchase and sales prices for all items to speed up invoice creation, enables you to create reports of sales by product line
- While Xero does not include full payroll functionality, it has recently added “Pay Run”, a simple routine to create and print customisable payslips, and generate BACS or CSV pay files and post bank payments. A handy feature of Pay Run is the ability to copy a previous set of payslips and edit them for use in subsequent pay days, potentially a big time saver.
- For detailed payroll calculations Xero can be linked to a number or popular online payroll solutions such as MyPAYE and Payescape.
- Xero also connects to a wide range of other SaaS services, including Salesforce.com, and a range of CRM, time recording, project management and other solutions.
- The Large edition adds comprehensive multi-currency accounting, with exchange rates updated hourly by XE.com (users can use these rates or their own), and sophisticated automatic accounting for, and reporting on, foreign currency gains and losses.
Xero is a powerful and reasonably priced online solution for businesses looking for the standard accounting functions that most small businesses use. The absence of payroll and full stock control will not be an obstacle for most customers. The accountants' Partner Edition simplifies managing multiple Xero clients and creates a powerful platform for firms looking to standardise on a single SaaS service for their clients.