Xero vs Sage vs QuickBooks: Which Accounting Software Is Best for Your Startup

So you have started in business…

Congratulations! You have made the jump and started your own business. There are only a select few life events that can be as simultaneously exciting and scary.

As you make your way through the world as its newest business owner, you will be faced with more challenges that you thought possible, face hurdles that cause you to doubt your decision to go it alone, have your resilience tested to extremes, and solve problems more regularly than the weather changes. The rewards for your efforts can make it all worthwhile.

One challenge you will face as a business owner will be managing your finances. Thankfully, with the advancement of technology, several accounting software solutions are available to simplify the process.

In this blog, we'll compare three popular accounting software solutions for small and medium businesses: Xero, QuickBooks, and Sage, to help you make an informed decision for your business.

Where do you start?

Choosing the right accounting software for your business can be a difficult decision. You might currently have manual records, an excel spreadsheet or an industry specific bespoke system. For a general purpose one-size-fits-all solution, the market is dominated by the big three providers:

• Xero

Xero is a cloud-based accounting software best suited to startups, SME's and growing companies, to manage their finances anywhere with an internet connection. Key features provided include: Bookkeeping, Invoicing, Financial reporting, Tax returns, Cash-flow management, Inventory management, Performance dashboards, live links to your bank feed, and more. Xero also integrates with over 800 apps in their app marketplace. This makes it a great choice for businesses looking to streamline their operations.

• Pros: User-friendly intuitive design, wide range of features and integrations, excellent customer support.
• Cons: Limited number of users and payroll capacity, so packages get more expensive as your team grows. Some features require add ons which can increase costs.

• Sage

Sage software is a comprehensive accounting solution designed for small and medium-sized businesses. It enables users to efficiently manage various financial tasks, including accounting, invoicing, expenses, cash flow, bank reconciliation, inventory, multi-currency transactions, and financial reporting. Additionally, Sage facilitates online tax return submissions, ensuring compliance with tax regulations, and assists in managing employee payroll and HR functions.

• Pros: Wide range of features and industry specific solutions are available.
• Cons: Initial set up can be complex and time-consuming, limited mobile functionality, costs can be higher than competitors.

• Quickbooks

QuickBooks is a widely-used accounting software developed by Intuit, designed to assist small and medium-sized businesses in managing various financial tasks. It offers both desktop and cloud-based versions, providing flexibility to users.

• Pros: User-friendly design, mobile accessible and good range of integrations.
• Cons: Limited in scaleability in advanced functionality and data size constraints, so may struggle as your business grows.

Let’s not forget about FreeAgent, which is a great solution for smaller businesses with the added bonus of being free to RBS, NatWest and Mettle business account customers. While it may lack some of the features available in the competitors above, it is easy to use and can be a good option for freelancers and soleprenures.

How do they compare

The software solutions need to meet the needs of the entire small business market, so they are packed with features. There are subtle differences in each of the offerings that we summarise below:

There are various subscription levels in each offering at different price points, which unlock extra features such as advanced reporting. The version that you need will depend on your business.

Our recommendation

In our experience, Xero leads the field in terms of ease of use, integrations and reporting. When Xero was founded it was built from the ground up as a cloud-based solution, whilst the legacy desktop systems of Quickbooks and SAGE were repurposed into cloud solutions. The Xero app marketplace allows you to bolt on thousands of bespoke solutions which will help you automate as you grow and provide a seamless experience for your customers.

Some of the key features that will help you as you launch your business include:

• Creating and sending invoices

Xero allows you to create and send invoices directly to your customer from your computer, tablet or phone. Payment links can be added to allow you customers to pay directly to your online payment provider.

• Repeating templates

Where your business sends out recurring invoices – perhaps for rent or as part of a service contact – a repeating template will automate the process. Further still, if the values don’t change Xero can create and send the invoice to the customer with no human input.

• Credit control

There are multiple tools within Xero to help you collect cash faster. Payment links within invoices have been proven to accelerate cash collection. Automated invoice reminders can be customised and scheduled to send at intervals of your choice, and customer statements can also be sent directly from the system.

• Bank feeds

Xero will connect directly to your bank and pull transactions in daily. Once the data has been received, Xero’s AI will look to automatically create or match transactions making the reconciliation process easy.

• Bank rules and cash coding

Transactions that repeat weekly, monthly or otherwise can be captured via rules and allocated to the appropriate heading. Use rules to quickly reconcile transaction such as bank fees, payroll, HMRC payments, loan payments, rental payments and more.

• App Store

Xero is great as an all-round solution. But if your business needs something more specialised then their app store will have the solution. You can search by function or industry to further integrate and automate your back office functions.

Next Steps

Of course, whilst our preferred system is Xero, we support Quickbooks, SAGE, FreeAgent and many other systems. We consider ourselves to be experts in Xero and that expertise allows you to benefit from our knowledge and experience. Ultimately, our goal is to find the best solution for you and your business.

Cloud computing disrupted the existing desktop-based systems, and recent advances in artificial intelligence will no doubt see a greater focus on increased automation. Globally, the relentless progress towards cloud systems will see the days of desktop systems numbered, with e-invoicing expected to become mandatory by 2030.

The days of manually pulling together your books and records are gone. We should embrace change and look forward to the future and make it work for us.

How we can help

Managing your business can be tough, but you don't have to do it alone. At Haines Watts, we're here to help you navigate the financial side of things, so you can focus on what you do best.

Whether you're just starting out or looking to upgrade your current systems, we specialise in cloud accounting and supportive apps to streamline your admin tasks. Let us handle the setup and bookkeeping, giving you more time to run your business.

From crafting a solid business plan to scaling up and planning your exit strategy, we're with you every step of the way.

Ready to simplify your financial management? Reach out to us today for a free consultation tailored to your needs.

See how cloud computing can help you, talk to one of our advisors today, or download our free Cloud Accounting Guide