FreshBooks vs. Xero: How They Compare

Choosing the best accounting software for your small business is an important decision—and with all of the options on the market, you might have a difficult time determining exactly which is the right solution. 

Through your search process, you’ve more than likely come across FreshBooks and Xero, both robust, highly reviewed, web-based accounting software systems. 

In fact, FreshBooks and Xero are very similar. Both software solutions have three plan offerings, provide a wide range of essential accounting functions, and are designed to serve all kinds of small businesses. 

This being said, you may be wondering how FreshBooks vs. Xero compare—what are the differences between these two accounting software options and which one is best for your business? 

This FreshBooks vs. Xero guide is here to help. We’ll explore everything you need to know about these software systems including pricing, plans, and features, so that you can better determine which one is right for you.

In order to definitively compare FreshBooks vs. Xero, you’ll need to know exactly what these two business accounting software solutions can offer your business—and how much they’ll cost. 

As we mentioned earlier, however, FreshBooks and Xero have core similarities. Both of these accounting systems are web-based, meaning you are able to use them wherever you have internet access. Additionally, both FreshBooks and Xero offer three different plans, each with increasing functionality as their pricing increases. 

Furthermore, FreshBooks and Xero both give you the ability to handle core accounting tasks— invoices, expenses, and reports—and are generally regarded as user-friendly. 

So, how are FreshBooks vs. Xero different? Let’s dive in deeper to answer that question, starting with the specifics of the FreshBooks software.

With FreshBooks, you have the ability to choose from their three service plans: Lite, Plus, and Premium. For a limited time, FreshBooks is offering 60% off for six months on Lite, Plus, and Premium plans when new users skip the 30-day free trial period and opt to buy now. Before we explain the differences between these plans and what each can offer your business, let’s discuss the features that are included in all FreshBooks offerings. All three of their plans include:

• Customizable, professional invoices
• Ability to accept credit cards and ACH bank transfers online
• Project budgets and reports
• Basic accounting functions like balance sheets, cost of goods sold, chart of accounts, etc.
• Ability to send estimates, track time and expenses
• Storage for client information and relationship feed
• Team and client management and collaboration tools
• Dashboard for monitoring all accounting functions
• FreshBooks mobile app with automatic data sync
• Toronto-based customer service via phone or email

This being said, the first plan FreshBooks offers is the most simple, and therefore, the least expensive. FreshBooks Lite is available for $15 per month, or a discounted $13.50 per month if you opt for a yearly plan. According to the FreshBooks website, this plan is best-suited as a self-employed accounting software, especially for mobile business owners, allowing you to attach five billable clients to your account. 

In addition, FreshBooks Lite includes:

• Unlimited and customized invoices
• Unlimited expense entries
• Automated bank import
• Unlimited time tracking
• Unlimited estimates
• Online credit card and ACH bank transfer acceptance
• Tax time reports
• Custom functionality and workflow
• Over 200 integration options including payroll, customer relationship management software, payment processors, and more

For small businesses who need more from their accounting software, FreshBooks offers their Plus plan (the most popular option), at $25 per month, $22.50 per month for a yearly plan.

FreshBooks Plus includes 50 billable clients, as well as all of the features of Lite features, as well as: 

• Unlimited proposals
• Automated recurring invoices
• Double entry accounting reports
• Scheduled late fees
• Automated late payment reminders
• Client retainers 

With the Plus plan, you also have the option to add FreshBooks advanced payments for a fee of $20 per month.

The final FreshBooks plan, Premium, is designed for larger, growing businesses. For $50 per month ($45 per month for the annual plan), you have access to all of the features of the previous two plans and you can accommodate 500 billable clients.

It’s important to know that all of these FreshBooks plans only include access for one user. If you want to add team members to your account, you’ll need to pay $10 per month, per user.

Now that we know what the pricing and features look like for the different FreshBooks plans, let’s explore what Xero can offer. Xero, as we’ve mentioned, also has three plan options—Early, Growing, and Established. 

Each of these plans gives you the ability to send invoices and quotes, enter bills, and reconcile bank transactions. In addition, all of the Xero plans include:

• Unlimited users
• Mobile app access
• Inventory management software
• Financial reporting and tracking with customizable Xero dashboard
• Online payment acceptance
• Asset management tool
• Automatic bank feeds for multiple banks and accounts
• Contact syncing and smart lists
• Online purchase orders
• Sales tax software
• Online filing system
• Over 700 integration options, including payment processors, time-tracking, and point of sale, and more
• Built-in integration option for full-service Gusto Payroll (with associated costs)
• Multi-layered security
• Access to the Xero accounting mobile app
• 24/7 unlimited online customer support

The first Xero option, the Early plan, is going to be one of the most affordable accounting software solutions you’ll find—but with limited functionality. At $9 per month, Xero Early will allow you to send five invoices and quotes, enter five bills, and reconcile 20 bank transactions. 

Because of these restrictions on your accounting capabilities, Xero Early is geared towards very small businesses or sole proprietors.

The Xero Growing plan, on the other hand, will give your small business more functionality, but will also cost more: $30 per month. 

For this price, you’ll no longer have the limitations associated with the Early plan—you’ll be able to send unlimited invoices and quotes, enter unlimited bills, and reconcile an unlimited number of bank transactions.

The final Xero offering, the Established plan, is designed for larger small businesses who want additional capabilities within their accounting software. 

For $60 per month, therefore, Xero Established will give you all of the functionality of the Growing plan, as well as multi-currency options, expenses tools to capture and manage claims, and project management tools to track time and costs.

Now that we’ve reviewed the details of both of these accounting software solutions, let’s discuss the significant ways in which FreshBooks vs. Xero compare against one another.

By highlighting these crucial differences, you’ll be able to determine which platform better meets your business accounting needs—and therefore, whether FreshBooks or Xero is the right solution for you. 

Ultimately, both software systems have their merits, but FreshBooks stands out in terms of their simplicity, usability, and time tracking. Xero, on the other hand, stands out in terms of users, billing, inventory tracking, and overall functionality.

Let’s explain further:

As we mentioned, when comparing FreshBooks vs. Xero, FreshBooks wins when it comes to their simple and easy platform, as well as their time tracking capabilities.

Despite the limitations you see with the Xero Early plan, when it comes to the Growing plan and above, Xero stands out (along with QuickBooks) as one of the most robust accounting software options on the market. Comparing FreshBooks vs. Xero specifically, Xero’s users, billing, and inventory management features are some of the platform’s most significant benefits.

At the end of the day, both FreshBooks and Xero are solid choices when it comes to small business accounting software. Therefore, since you know your business best, the winner of FreshBooks vs. Xero will depend on your specific needs and which option will better serve those needs. 

That being said, however, based on this FreshBooks vs. Xero breakdown, we’d say the most essential differences between these two solutions relate to the kind of businesses they’re designed to service.

With their connection to service-based businesses and on-the-go business owners, as well as emphasis on time-tracking, client information, and project collaboration, FreshBooks is probably better suited for smaller businesses—especially for those who are self-employed, freelance, or bill their services on an hourly basis. 

When it comes to Xero, on the other hand, this software is probably best-suited for small businesses who need more—those that have employees and would benefit from greater capabilities outside of basic accounting and bookkeeping. 

Nonetheless, with similarly priced offerings, three different plans to choose from, and overall user-friendly and accessible systems, either FreshBooks or Xero may work for your business—it all depends what, in particular, you’re looking for. 

Plus, if you want to test out either of these platforms, both FreshBooks and Xero offer a 30-day free trial of their software, so you may choose to explore these solutions for yourself before making a final decision.