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Product Review: Xero Online Accounting 2017

Beautiful Accounting Software for UK Small Businesses

29th March 2017 | Finance

Product Review: Xero Online Accounting

Xero is an online accounting software system created and headquartered in New Zealand, but well established in the UK market.

It has raced ahead in the small business sector since the UK version was launched in 2006, with over 130,000 UK business subscribers, making it the UK’s leading small business cloud accounting package by number of subscriptions.

Beautiful Accounting Software

Xero’s slogan is Beautiful Accounting Software – and it really is. The look and feel of the Xero application is clean and tidy, with an eye-pleasing blue and grey colour scheme, with highlights in red (for overdue items and messages) and green (for completed items such as paid invoices and reconciled entries).

Xero online accounting devices

Since the introduction of Xero’s full payroll product a couple of years ago, it is able to match the full functionality of online versions of its major competitors such as Sage and QuickBooks.

Xero has a significant advantage in that it has been created from the outset as a cloud-based accounting package, in comparison to established competitors whose software can sometimes feel a little dated.

Who should use Xero?

Xero will suit any small to medium-sized business, including startups and micro-businesses.

Both accruals and cash accounting are catered for, and behind the scenes Xero uses full double-entry bookkeeping. This will keep your accountant happy and allow them to make accounting adjustments for year-end accounts and tax reporting.

Freelancers and contractors with only a few clients and fairly straightforward needs may not require the full firepower of Xero, however it will still work very well for these businesses with quotes and invoicing functions built-in. Invoicing layout options are limited, but the system allows for you to create and upload your own .docx format invoice template.

Xero subscription pricing

Pricing is via monthly subscription, with an initial 30 day free trial. Subscription Plans are as follows.

  • Starter: £10/month. 5 invoices/quotes, 5 bills, 20 bank entries.
  • Standard: £22/month. Unlimited invoices, quotes, bills and bank transactions.
  • Premium: £27.50/month. Multi-currency functionality.

Online accounting software is a competitive sector, and introductory discounts are frequently offered by Xero (and their competitors). Check our deals page for current offers.

Xero features and functions

Xero includes a full range of small business accounting functions. These include:

  • Xero online accounting Xero Me appInvoicing, including direct payments and credit control functions.
  • Bills and expense recording, purchase orders, and payments.
  • File uploading to match against transactions.
  • Reporting (see more details below).
  • Inventory control.
  • Fixed asset management.
  • VAT return preparation and submission.
  • RTI-compliant payroll, and workplace pensions.
  • Bank transactions and reconciliations.
  • Sales quotes.
  • Contacts – staff, suppliers, customers, and others.
  • Multi-currency (with premium subscription plan).


A wide range of reports are provided as standard, covering all areas which would be expected for running a business and reporting progress. Report layouts have some flexibility, and may be viewed on screen, or exported as PDFs or in spreadsheet formats.

Financial reports include Budget Manager, which provides a budgeting function so that estimated revenue and expenses can be compared with actual figures each month. The budgeting process is fairly simplistic and would benefit from being a little more helpful for doing the budgeting directly in Xero – for example, allowing notes to show underlying assumptions for certain budget items. Overall though, it works very well.

The Reports area also contain the VAT and PAYE report preparation and filing functions. These link directly to HMRC’s online services, making filing a breeze. Copies of filed reports are kept, alongside detailed breakdowns to provide to tax auditors.

Bank Accounts & Reconciliations

Transactions from bank accounts are loaded into Xero either by manually importing transaction files in the most common formats (OSX, QIF or CSV), or using their bank feed function. Depending on your bank, bank feeds can be delivered automatically each day, or imported into Xero on demand.

Bank reconciliations are a joy, with a simple click of an “OK” button followed by a satisfying green tick, hovering briefly before the matched entries close. Matching options are clear – if Xero hasn’t matched automatically to an existing invoice or a defined rule, you can either enter the details, attempt to match against the remaining unmatched invoices on the system, or make a note for further discussion with a colleague or adviser.


Xero Payroll is an RTI-compliant payroll professing software integrated into Xero. It provides a full range of functionality to handle any sized UK payroll. As payroll is built right in to the accounting system, accounting entries occur automatically, and the HMRC paperwork is created and able to be filed directly.

Employees can make leave requests, view payslips and submit timesheets using the Xero Me app, and Xero also handles employee communications and contributions to comply with auto-enrolment workplace pensions.

Xero online accounting UK payroll

Access and Availability

Access is via any web browser on any internet-enabled computer, tablet or mobile. Xero also publish a free mobile app called Xero Touch, for both iOS and Android devices. Xero Touch does not provide the full functionality of the desktop version but gives an overview dashboard, access to invoicing and receipt functions, contact book, and even allows bank reconciliations on the fly.

Like other cloud-based accounting services, Xero is available 24/7/365, apart from occasional software update windows of a few hours which usually occur on weekends with some advance warning.

A Xero subscription allows unlimited users with varying permission levels. Staff can be restricted to specific functions, and external advisers such as accountants may be invited to access the company’s records to give advice or prepare accounts.

Help, Support & Training

Xero subscribers have access to Xero support via phone or email, 24/7. We have found that the responses are swift, sometimes coming overnight, presumably being answered in some cases by Xero staff in New Zealand or Australia.

The Xero Business Help Centre is comprehensive and well put together, and the Xero Community Forum has a large number of users assisting each other and discussing the finer points of issues in using the software and applying it to practical situations. There are plenty of guides available, and help and training through Xero U, Xero TV and YouTube.

There is a solid acceptance of Xero by the accounting profession in the UK. Xero has a programme of certification for accounting firms, and hundreds of UK accountants are Bronze, Silver, Gold or Platinum Partners, so there are plenty of options for professional support.


The Xero App Marketplace contains over 500 applications that integrate with Xero. This gives a huge range of options for passing information between Xero and other business software, or for enhancing Xero’s impressive capabilities.


Xero is great for any small to medium business looking for a rock-solid and user-friendly cloud accounting system.

It has a few areas which could do with improvements – such as budgeting and invoice presentation – but these are really polishing what is already a class-leading product.

Start your Xero 30 day free trial now