Monday, 29 July 2013

Review of Xero Accounting software


I've recently implemented Xero accounting at a client, migrating from a larger legacy system.  This article is a review of our experience which I hope will be useful for anyone considering the same move.

The software was developed in New Zealand, but now has 200,000 users around the world.  The UK version seems perfectly adapted, and I didn't detect any kiwi flavour at all.

Getting started

It couldn't be easier to get started.  You go to, create a free account and you immediately have your own demo company on which you can try out the software to your heart's content.  Once you're ready to go live, you give Xero your credit card details, register your company and follow the very clear wizards for getting things set up.  Migrating data from a legacy system is always a challenge, but Xero makes it as easy as it can be.

Look & Feel

Xero has a very clean appearance with screens displayed in calming blue, cream & white.  Their slogan is 'beautiful accounting software'.  I can only say it hasn't started to grate yet.

Ease of use & help screens.

When you sign in, you get a dashboard showing key information on cash, customers and suppliers.  I didn't find this particularly useful, but it can be customised.

You can quickly find your way around, although the menu structure isn't always completely intuitive.  For example, the main thing a lot of users will want to do is to enter a purchase invoice.  To do this, you have to click 'Accounts > Purchases' & you're then presented with a subsidiary dashboard screen.  It's not immediately obvious that '+New' is the button you need.

That is a quibble.  Once you've gone through the menus a few times, everything becomes very easy.   And the screens where the work is done are extremely clear and user friendly.

Customer & supplier master data is held in a single 'Contacts' area, which is unusual.  Contacts are all stored by name rather than having account numbers.  I can imagine this causing difficulty if you have contacts with similar names - perhaps branches of the same company.

However, Xero scores very highly on user help.  Most screens contain a brief explanation of what to do.  These explanations can be hidden once you are familiar.  The more detailed on-line help manual is the clearest and most comprehensive I have ever seen, well written and fully searchable.  There's only been one occasion when I wasn't able to find what I needed.  A quick email to the support desk got me an answer within an hour.


Xero covers all of the basics - general, sales and purchase ledgers plus cash book.  There is a good range of standard reports included.  Also available, although not used by us to date, are modules for payroll, expenses and fixed assets.  Xero doesn't have the ability to handle stock control, sales orders or purchase orders.   However, there is a wide range of addons which are endorsed by Xero and claim to be fully compatible with it.  These can also be used to add features such as point of sale and CRM.

Bank statements can be loaded into the system very easily and Xero suggests matches with open transactions in a way that simplifies the reconciliation process.

More generally, practically any kind of data can be uploaded or downloaded.  There are lots of time saving tools that keep re-keying to a minimum.

If you want to use cost centres, or introduce any other dimension of analysis into your accounts, there is a feature Xero call 'Tracking'.  Any transaction can have a tracking code attached to it and there are reports available to analyse by these codes.  This feature could benefit from stronger controls.  There are no warning messages if you forget to enter a tracking code where there should be one.

A big plus for Xero is that they actively encourage feedback and, based on user feedback, they are constantly making improvements to the software.  These improvements are added automatically at no additional charge.  That's very different from the model we are used to where every few years you have to pay for a massive disruptive upgrade.

There's a lively online forum for Xero users.

Forms design

It's very quick and easy to design your own forms such as sales invoices and remittance advices.  These look professional and incorporate all of the right details, including logos.

Security & performance

Adding users is very easy with a quick exchange of emails. There are only 2 levels of security and it's not possible to fine tune the screens than any particular user can access.  We ended up having to give everyone the highest level of security.  Because the system is online, you can give access to an accountant or external adviser without having to disturb day to day operations.

There's a very clear audit trail.  You can see who's been in the system and for how long.

The software is in the cloud, so can be accessed from anywhere with an internet connection.  Very helpful if you love working from home.  Our broadband's not the fastest, but I never experienced any unacceptable delays in response times, suggesting the software is well engineered.  We haven't experienced any system downtime at all.  The security measures explained on Xero's website are high grade.  I wasn't able to find anyone critical of Xero's performance in this area.

Cost of ownership

Xero are aiming to grow a huge market share by pricing themselves very competitively.  They charge just £24 per company per month for use of the software, reduced to £19 if you don't need to account in foreign currency.  This covers any number of users and unlimited access to support and help.


The key criterion in any software decision is that the software meets the detailed business needs.  Assuming Xero fits the bill, then it's a superb choice because of its ease of use, security and low cost.  It's easy to see why so many people are switching to it.  I'm happy to join them and to recommend the product very strongly.

Wednesday, 24 July 2013

Cloud Accounting

Xero is currently the leading cloud accounting software package.  I've recently implemented it for a client.  In this article, I set out the pros and cons of moving accounting into the cloud.  A future article will be a review of Xero specifically.

What is Cloud Accounting?

Since computerised accounting was invented, it has involved buying software, installing it on a computer at your own premises, being responsible for keeping it up to date, backing up data, paying a fee for support and periodically paying out again for upgrades to the software.

Cloud accounting does away with all of these steps.  The business user enters into a contract with a cloud provider, paying a straight monthly fee.  The software is held on the provider's server and accessed over an internet connection.  All the user's data is also stored remotely and the provider is responsible for backups.  Software updates are provided automatically at no additional cost.

To date, it has mainly been developed for small and medium businesses.  As well as Xero,  KashFlow and FreeAgent are well known suppliers.  Package software providers such as Sage and QuickBooks have adapted their offerings for the cloud.  The approach is also moving upscale with solutions becoming available for larger enterprises.


The over-riding factor in deciding which accounting software to use is functionality - does it meet the business needs?  This is a far more important factor than where it is hosted.  On the assumption that a cloud solution meets this requirement, the following are the advantages over a conventional packaged software approach:-

Cost.  UK pricing for the three leading providers is a maximum of £25 per month per company, regardless of the number of users or number of transactions.  This compares very favourably with the hundreds or thousands of pounds of up-front cost required for a packaged solution.  Furthermore, there are no hardware costs or further charges when upgrades are required.

Security.  The cloud providers deploy state of the art security methods, which are likely to be far stronger than anything a small or medium business could afford.  There is a much lower risk of data loss than with a packaged solution.

Support and upgrades.  Cloud companies offer unlimited on-line support.  It is therefore in their interests to make the software work as well as possible.  Upgrades to the software are made automatically and for free.

Capacity for growth.  There is no limit on the amount of data storage.  Running out of disk space and upgrading servers are problems for the cloud provider.

Availability.  The system can be accessed from anywhere there is an internet connection, at any time.


Single point of failure.  If your internet connection goes down, you have no accounting system.  This is a worry if you're in an area where the connection is flaky.  That said, broadband availability is becoming a key utility, rather like water or electricity supply and, in most places, 100% uptime is the norm.

Upgrades.  If you don't like any of the upgrades that the provider has installed, that's hard luck.  There's no possibility of rolling back to a previous version of the software.

Dependence on supplier.  If the supplier goes bust, you lose your accounting data.  A periodic download of data to a local computer is good practice.

Less drastically, with cloud accounting you are locked into the supplier who may start gouging you with price increases.  This is also of course true of packaged software suppliers.  It's important to carry out due diligence on your cloud provider, as you would with any other strategic partner.

Response times.  A slow internet connection may lead to unacceptable response times from the server.  In practice, the software is engineered to minimise loads on the connection and very few users report this as a problem.


When looking for accounting software, the primary consideration is that it meets the business requirements.  If a cloud solution can give a business what it needs, it is likely to find that the advantages strongly outweigh the disadvantages.  Many people have reached this conclusion and use of cloud accounting is currently doubling every year.

Monday, 22 July 2013

Technological Change

Despite economic depression, technological innovation continues to occur at an increasing rate.  Here's a quick primer on some of the latest developments which have caught the eye and which have the potential to upset many existing industries. Google's self-driving cars, for instance, sound great for reducing accidents and making travelling easier.  If you make your living driving a taxi or a truck, though, it may not be so positive for you.

File:Google's Lexus RX 450h Self-Driving Car.jpg