Xero vs FreshBooks: Which is Best for Your Business?

Overall, Xero is the better accounting software platform. Xero offers more powerful core accounting tools than FreshBooks, such as supporting multiple currencies and automatic expense categorisation, and has much more advanced reporting tools, offering custom reports and cashflow projection.

That said, that doesn’t necessarily mean that Xero is the better choice for all businesses. FreshBooks is much easier to use than Xero, provides better customer support, and is cheaper overall. This makes it a better choice for new businesses or freelancers, while Xero is a better option for established companies looking to grow.

Both providers are great accounting software platforms for small businesses for different reasons. We’ll examine their strengths and weaknesses in this article to help you choose the best option for you.

Xero vs FreshBooks: At a Glance

Here’s what you need to know about Xero and FreshBooks:

• Accounting features: Xero has better accounting tools than FreshBooks. It offers more tools, such as multi-currency invoicing, CIS tax, and financial forecasting tools, all of which are missing from FreshBooks.
• Ease of use: FreshBooks is much easier to use than Xero. It has a clearer menu layout, and lets you edit settings from the page you’re working on.
• Pricing: FreshBooks is cheaper than Xero overall. It has a cheaper starting price, and its most expensive plan costs less than Xero’s.
• Customer support: FreshBooks offers better customer support than Xero, since it has a phone line and live chat that are open on weekends. Xero makes it hard for customers to reach a live support agent.

Xero vs FreshBooks: Accounting Features Comparison

Winner: Xero

When it comes to key accounting features, Xero outpaces FreshBooks in every category. In some areas the differences are minimal, such as when it comes to invoicing or tax support, but in others, such as reporting, Xero offers much more advanced tools than FreshBooks.

We’ll compare each platform’s key accounting tools individually so you get the full picture.

Invoicing and quoting: Xero has a slight edge

Xero and FreshBooks offer similar invoicing and quoting tools. On both platforms, users can:

• Create and send invoices and quotes to clients directly from the platform
• Automate creating and sending payment reminders for clients
• See when clients have viewed invoices
• Facilitate payments by integrating with banks and payment processors, and create payment links for clients or offer BACS transfers

One key difference between Xero and FreshBooks is that Xero allows for multi-currency invoicing and quoting, while FreshBooks only allows you to create invoices using one currency. This makes Xero a better option for businesses that operate internationally.

Xero also has less restrictions on invoicing and quoting than FreshBooks. Invoicing is only limited on the £16 per month Xero Ignite plan (20 invoices per month). All other Xero plans offer unlimited invoicing.

FreshBooks, on the other hand, offers unlimited quotes and invoices but restricts the number of clients you can send them to to five on the £15 per month Lite plan, and 50 on the £25 per month Plus plan. You have to be on the £35 per month Premium plan to be restriction-free. Xero offers you a restriction-free plan from £33 per month.

I found FreshBooks’ invoicing tools easier to use, thanks to the clear layout and easy on-page settings editing.

That said, Xero offers more tools than FreshBooks. For example, there are far more prebuilt fields in Xero’s invoicing and quote templates, such as for unique item codes and client IDs. This makes Xero better equipped to handle a high volume of sales and clients than FreshBooks.

Expense management: Xero offers more accurate expense recording

Both Xero and FreshBooks let businesses submit expense claims directly through the software, but Xero offers more flexibility in how expenses are recorded.

On top of manual entry, FreshBooks allows for expenses to be tracked and classified based on uploaded receipts. However, I found that classifications weren’t always accurate when testing this function.

Xero offers more accurate automation. On top of manual entry, Xero allows expenses to be classified and recorded via bank feed. Since most banking apps automatically classify outgoings, this allows for much more accurate results than FreshBooks’ receipt-based system. Xero also has more preexisting expense categories than FreshBooks, which makes it easier to categorise them manually, and it can calculate the cost of petrol per mile, something FreshBooks can not do.

Xero is also cheaper than FreshBooks when it comes to pricing for expenses. Both charge extra for allowing employees to submit claims via the software.

Xero has quite small software user limits (one to 10 depending on the plan), and charges £2.50 for any additional users needing to submit expense claims. FreshBooks’ plans, on the other hand, are all for one user, with additional users costing £8 each.

Tax preparation: Xero supports more types of tax returns

Xero and FreshBooks are quite evenly matched when it comes to tools to help businesses with tax preparation, although Xero offers slightly more.

Both software platforms can calculate and deduct VAT, and are part of the Making Tax Digital (MTD) initiative, meaning businesses can file VAT returns to HMRC via an online portal. I didn’t see any discrepancies in either softwares’ calculations when I was testing them, so businesses can be confident they’ll get an accurate tax record.

Where Xero differs from FreshBooks is that it calculates CIS and supports CIS returns. This does cost an extra £5 per month, but it’s a tool FreshBooks is missing, making Xero a better option for businesses in the construction industry that work with contractors.

Xero’s software can also automatically update a change of tax code when regulations change, whereas FreshBooks requires businesses to manually change codes.

Reporting and financial forecasting: Xero has far more tools than FreshBooks

When it comes to reporting and financial forecasting tools, Xero is miles ahead of FreshBooks.

For starters, Xero allows businesses to generate custom reports and modify existing report templates to suit their needs. Neither of these actions is possible with FreshBooks. This means, for example, that with Xero businesses can generate reports based on singular categories in the chart of accounts, such as assets, liabilities, or equity, whereas with FreshBooks you only have the option of seeing these figures altogether in a balance sheet.

Additionally, FreshBooks doesn’t offer any tools to help businesses plan and predict their financial future, whereas this is one of Xero’s strong suits.

With Xero, businesses get access to:

• A cashflow prediction tool
• The ability to track upcoming monthly bills and expenses
• Budget setting for departments, projects, and accounts
• The ability to track the depreciation and/or amortisation of fixed assets over time

I particularly liked using Xero’s cashflow projection tool. Other software platforms, such as QuickBooks, offer a similar tool, but I found Xero’s the easiest to use and interpret thanks to its clear layout.

Because it has far more reporting and analytics tools, Xero is a much better option for established businesses that need to plan for future growth. FreshBooks’ limited tools for financial planning make it better suited to sole traders, such as freelancers, or micro business owners.

Integrations: Xero offers far more

When it comes to integrating with third-party software and apps, Xero beats all the competition. Xero offers 1,000 integrations, which include payroll, CRM, ecommerce, and EPOS software, to name a few.

FreshBooks, on the other hand, only integrates with around 100 third-party apps, although its selection does include popular ecommerce software, such as BigCommerce, and CRM platforms such as Freshdesk and Agile CRM.

That said, if your business uses a lot of software platforms, there’s a better chance that Xero connects with it than FreshBooks, making Xero the best option for ecommerce businesses.

Xero vs FreshBooks: Ease of Use

Winner: FreshBooks

FreshBooks is much easier to use than Xero overall, making it a better choice for users that are new to accounting software, or just need a basic accounting tool to get them through tax season.

Part of what makes FreshBooks easy to use was its main menu, which was very clearly signposted. I also found its invoicing and quote tools intuitive, since quotes could be turned into invoices at the click of a button. Another aspect I liked about FreshBooks is that settings, such as payment reminders and currency, could be edited directly from the invoice or bill I was working on, saving me from going to a separate page.

That said, not everything was perfect. I found FreshBooks’ overall system for sending messages to clients confusing. There’s no clear way to send them an email besides through existing invoices and quotes, which was frustrating when trying to create tailored messages.

Compared to FreshBooks, I found Xero much more challenging, especially when it came to navigating the platform. Its menu was quite poorly organised, with most key tools hidden in dropdown menu tabs with vague titles like “Tools”. Additionally, even though I liked the level of detail you could assign to invoices and expenses, I felt the order of data fields was confusing, with fields like “unique IDs” separating fields detailing costs and addresses, which led to a lot of scrolling on my part.

Despite these usability issues, Xero still impressed me with its detailed expenses tool. It was one of the few platforms that could calculate the cost of petrol based on mileage, and it let me link an expense to a specific client. And, as I’ve noted, Xero offers excellent reporting tools that are quite easy to use while still offering advanced insights.

Xero vs FreshBooks: Pricing

Winner: FreshBooks

FreshBooks is cheaper overall than Xero. FreshBooks’ plans range from £15 to £35 per month, plus a custom plan, while Xero’s plans range from £16 to £59 per month.

Here’s an overview of Xero’s pricing:

Here’s a look at FreshBooks’ pricing:

Xero has an average monthly fee of £38.75 per month compared to FreshBooks’ £25.

Xero’s higher average price is largely due to its top two plans, although these do offer good value for money for businesses interested in powerful reporting tools.

However, for businesses that need a basic software for day-to-day bookkeeping, FreshBooks is better value, since it’s cheaper overall.

Xero vs FreshBooks: Customer Support

Winner: FreshBooks

FreshBooks offers slightly better customer support than Xero, especially when it comes to points of contact.

Xero makes it quite difficult for customers to get in touch. It doesn’t have a dedicated support phone number, email address, or even a live chat line. To get support, customers need to submit a support request via the Xero Central portal. Xero states that support team members may call customers, but there’s no guarantee of this, and it’ll be at their convenience, not yours.

In lieu of live support, Xero customers need to rely on Xero’s self-help articles and its forum. Thankfully, the help centre is well-stocked with clear, up-to-date guides, but that’s not a substitute for readily-available live support.

FreshBooks, on the other hand, has a phone line that customers can dial, a support email, and a support live chat. The support team also operates from 1pm to 12am seven days a week, which means they can be contacted outside of typical nine-to-five hours.

Xero states that its customer support agents are available 24/7. However, since the provider makes it impossible to get a direct live response from customer support, in practical terms, this doesn’t make much of a difference to support availability.

Alternatives to Consider

It’s possible that, after all this, you’ve concluded that neither Xero nor FreshBooks is right for you. If that’s the case, here are some alternatives to consider:

• ZohoBooks: If you want an easy to use platform that still offers powerful reporting and forecasting tools, Zoho Books is a great choice, especially for businesses that need strong inventory management.
• QuickBooks: If you like Xero’s advanced reporting and analysis tools but want an accounting tool that’s a little more modern and user-friendly, we recommend QuickBooks.
• Sage: If you want to maintain a strong brand image with highly customised invoices, Sage is a good choice. The software also has the added bonus of integrating with Sage’s payroll and HR ecosystem.
• FreeAgent: If you want a highly affordable tool that’s easy to use, offers great support, and can be used to run advanced reports.
• Clear Books: If you’re nervous about tax returns and want software with advanced tax support.