In the previous article in our series on Xero vs. QuickBooks, we talked about how to set up an accounting software platform that makes sense for your business. In this installment, we will talk about how to use the platform you select to help run your business. Specifically, we will cover:
- Bank Feeds
- Bank Account Reconciliations
- Accounts Payable
These four areas are critical for being able to track transactions, monitor cash flow, reconcile accounts, and produce reports that enable you to view performance over a desired period of time. Both QuickBooks (QBO) and Xero have their own advantages — and complications — supporting these areas. Let’s examine.
Xero vs. QuickBooks: Which Will Make Your Life Easier?
Not everyone uses software the same way to run a business. But, at the end of the day, technology should always work for you, not against you. We want to make it as easy as possible for the software platform that you select to enhance, not inhibit. Consider the options in each of these areas to help streamline business processes.
1. Bank Feeds
Both systems will allow you to connect to and download transactions directly from your bank or credit card. Also, both systems facilitate coding the transactions automatically. Each system takes a different approach to code your transactions and you really need to review the downloaded transactions before you accept them.
– In Xero, you have to create the rules to record transactions from your bank feed. You have to review and determine appropriate coding for downloaded transactions that do not conform to a “rule” that you already set up.
– QBO uses AI to anticipate the nature or coding of a transaction. If you haven’t set up a rule, QBO will recommend one. You have to pay attention to ensure that QBO guesses correctly, otherwise you could create more work for yourself correcting this.
2. Bank Account Reconciliations
It’s a best practice to reconcile your financial accounts to each bank statement that you receive. Both systems support reconciliations, but they handle them differently. Which approach do you prefer?
– QBO offers a more traditional reconciliation process. You enter your closing balance and check off transactions in the system that have cleared the bank. This is a more manual approach that requires that you look at every transaction, however it can make it easier for you to spot mistakes.
– Xero, on the other hand, reconciles as you accept transactions. It assumes that a transaction recorded from your bank feed is correct. Transactions that haven’t hit your bank can be difficult to find, though.
Both of these systems have integrations with numerous third-party software solutions. You have a choice of payroll solutions from which to choose. Our tip is to always pick a payroll solution that has an automatic feed to your accounting system.
– QBO has an integrated QBO payroll solution in addition to third party integrations. It’s usually best to pick integrated solutions sold by the same vendor. We have seen issues with QBO’s integrated payroll solution. It’s not uncommon for this integrated solution to duplicate entries. You have to make sure it’s set up correctly and you have to pay attention. Additionally, QBO’s payroll integration is not included. You will pay a separate fee for QBO Payroll or whichever integrated payroll solution you select.
– Xero does not offer its own payroll solution. It does integrate with several third party or independent solutions, though. We encourage you to take a look at a few. Many of these third-party systems facility employee communication, scheduling, and even the hiring process. Look for a payroll system that offers self-service that allows your employees to keep their personal information up-to-date.
4. The Accounts Payable Process
As you evaluate bill payment solutions, keep in mind who you plan to have pay your bills. The best practice is to separate responsibilities on your team. The employee who opens and records the bills should not have authority to pay the bills. You want to build a double-check or review into all financial processes.
Both platforms link to bill payment services. Make sure to check out the business online billpay offered by your bank. Banks frequently have good systems with some built in controls at a lower cost than a third-party bolt on.
– QBO includes an Expenses tool within the software to track receipts and vendor invoices.
– Xero recently purchased HubDoc to provide a similar feature.
Talk to Our CPA Firm for Xero or QuickBooks Support
Once you have decided on an accounting software platform, you want to make sure it works for you to support the business. It should help achieve efficiencies, spend less effort on typical business processes, and help you gain a better understanding of the health of the business.
This means more time to spend on things that matter the most when running a business. Need help arriving at this point with your 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 using your accounting software platform to help run the business. Call us today to discuss. We can help!
– A FINAL NOTE: Stay tuned for the next article in this series on Xero vs. QuickBooks. In the next installment, we will walk through a more detailed discussion of the key features and functionality of the two accounting software platforms to help you get the most out of your investment in accounting software.