As your practice grows, you want to make sure you’re getting the most value from your accounting tools. While there are many accounting software options to choose from, today we’re going to look at two of the most popular — Xero vs. QuickBooks Online — and how they can impact your practice’s financial management.
At a fundamental level, both of these systems lead to the same end result. The difference is really which one makes the most sense for your practice and has the accounting features and functionality that fit best with how you run the business.
And the truth is, selecting an accounting platform is just half the battle. Perhaps even more important is ensuring that it is set up correctly and used properly. With that in mind, let’s look into how to choose between Intuit Quickbooks and Xero for your practice.
5 Steps for Effective Xero or QuickBooks Set-up & Usage
Let’s look through each important step in the process of getting you where you want to go using accounting software.
1. Commit to Using the Software
Buy-in is important to get started using your accounting software system. It takes a lot of effort to get the systems to work correctly. There could be some frustrating moments during the initial set-up stage, so you need to make sure that you and your team are committed to the platform you choose so that you can push through these challenges and start realizing the benefits.
We recommend getting help during this set-up stage to make sure everything is properly configured, each team member or user has the right access (Xero offers unlimited users), and you feel comfortable with how the system operates.
We like to remind clients that your accounting software is designed to help your practice, not create an additional burden. Working with our CPA firm, we can help with accounting set-up and answer questions so that you and your team are ready to go.
2. Use a Chart of Accounts
Once you get set up in your accounting system, you should use a Chart of Accounts (COA) that helps you understand your practice’s business activity. A COA will help your practice stay organized, make it easy for your team to find specific accounts, and enable you to track transactions by categories.
- For example, for a medical practice, the COA should distinguish between medical equipment costs and medical insurance costs.
- For example, for a dental practice, the COA should distinguish between clinical costs and office costs.
3. Create Standard Reports
The proper use of a Chart of Accounts supports your ability to create standard reports in the accounting system. We recommend reviewing these financial reports on a monthly basis:
- Look at your balance sheet.
- Review your income statement.
- Evaluate your Key Performance Indicators (KPIs).
You may also want to consider creating a trend report that will present several months in sequence so you can evaluate trends. Then, at the end of the year, take some time to generate a year-over-year report to help you see if your practice is gaining or losing ground against last year. This will help you see whether you are on the path to profitability.
4. Use Financial Integrations
Both Xero and QuickBooks Online allow you to connect your accounting software to other software to simplify things for you and your practice.
- Both allow you to connect your bank and credit card accounts to download activity.
- Both allow you to create rules to help you record activity in your books.
- Both integrate with payroll systems to streamline paying your team.
Xero was designed using a “Best of Breed” approach that offers integrations with a significant number of applications in just about every category. Intuit Online, on the other hand, typically has fewer integration partners in each category and includes more Intuit products in their product suite.
5. Keep Score!
In Step 1, we talked about committing to using the software platform of your choosing. There is another important commitment to make, which is keeping score.
Your accounting system should be a control panel for your business. Think about it as a scoreboard keeping track of the results of your practice’s activity.
Used in concert with your practice management system, the software should help you evaluate success to-date, make adjustments as necessary, and help set your course for the future to continue to grow and remain profitable.
We’ll Help You Set up Your Accounting Software Platform
Every practice owner is at a different starting point when it comes to using accounting software. Perhaps you’re already using the QuickBooks or Xero accounting software and wondering if you should switch to the other platform. Or, perhaps you’re currently using pen and paper recordkeeping and you want to make the transition to an accounting software platform.
We’ll meet you where you are. We’ll help you get to where you want to go. Talk to our Houston CPA firm about setting up and using an accounting software platform that works best for your practice. Call us today to discuss. We can help!
– A FINAL NOTE: Stay tuned for more articles in this series on Xero vs. QuickBooks. In the coming weeks and months, we will walk through a more detailed discussion of the similarities and differences between the two accounting software platforms to help you make a decision that works best for your practice.