xero software - do business beautiful? fact or fictionClick To TweetXero (software) Xero is a New Zealand domiciled public software company that offers a cloud-based accounting software platform for small and medium-sized businesses.

The Company was founded in a Wellington studio apartment in 2006 by Rod Drury and his personal accountant when they felt that traditional desktop accounting software had become outdated and decided to create a modern cloud-based product. Xero Limited’s global headquarters are still located in Wellington.

Originally called Accounting 2.0, the name was unpopular with the company’s staff and the decimal point made registering an internet domain name impossible. Changing the name to Xero also provided a challenge with the domain name, as the existing xero.com domain was a Linkin Park fan site (Xero was Linkin Park’s original name). Rod decided to fly the existing domain administrator to New Zealand from the United States, wined and dined him, and ultimately convinced him to sell the domain for $20,000.

The company entered the Australian market and the United Kingdom in 2008, and United States in 2011.

In 2017, Xero surpassed one million customers globally, and the following year, in December 2018 Xero hit a million subscribers in its home markets of Australia and New Zealand. In 2019, Xero announced it had hit 1.8 million subscribers, employed 2,500+ people around the world and achieved positive free cash flow for the first time.

The company was rated by Canstar Blue as Australia’s best accounting software four consecutive years from 2015-2018. On the inaugural 2018 Financial Times FT1000 High-Growth Companies Asia Pacific list, Xero was the fastest growing tech company in the $200 million+ segment. In 2018 Xero also won ‘Bookkeeping software of the Year’ from the Institute of Certified Bookkeepers UK and Small Business Accounting Software of the Year’ – Practitioners’ Choice’ from members of AccountingWeb (UK).

The software has over 1m users and is the primary accounting solution for over 16K accounting firms. The company has recently added a project management feature, which was one of the biggest drawbacks previously.

Prices start from £22 + VAT per month for the standard version that allows a business to send invoices and quotes, enter bills, reconcile bank transactions, submit VAT to HMRC for Making Tax Digital, and make automatic CIS calculations and reports to 27.50 plus VAT per month for the premium version that to enable multiple currencies. The Sage one accounts extra cloud solution is £20 plus VAT but includes multiple currencies but not multiple users.




Product day-to-day overview

Day by day usage starts with looking at the live dashboard – from here you can see the health of your business, up to date bank balance, who owes you money, who you are due to pay and peruse the account watch list where you can see key balances on business critical nominal codes (inventory, sales, liability to HMRC etc)

Then there is the day to day processing:

Users can raise a sales invoice on the web app or mobile app. There is also the ability to create quotes and send them online to a customer for them to approve. You can then convert the quote to a sales invoice. They are encouraging our users to send their sales invoices with an online link rather than a pdf as they will be able to see when your customer has opened the invoice; so there is no need to ask confirmation of receipt of invoice. With online invoices they are also encouraging online payments through gocardless, stripe etc to enable businesses to be paid faster and easier.

Xero has apps integrations that help with data extraction and automation which leads to cost savings. Whether that’s Receipt Bank or their recently acquired tool, Hubdoc that allows users to take a photo of their purchase invoice and leave it to Hubdoc to extract all of the key information and post the invoice as a bill within Xero.

Bank reconciliations are quick as they have direct feeds with the majority of UK banks which means that all of the transactional data is fed in automatically through into Xero. Its intuitive as its all colour coded and the reconciliation screen makes it easy to match invoices and bills against the relevant bank transaction all from within the same screen.

Users can regularly compare multiple periods whether that’s by month, quarter or year to check on the performance of the business. Each column on the P&L for example can be unique which means it offers our users the ability to compare various dates and variances across periods.

There is also a facility in both Suppliers and payments, for pre-set transactions you can set up commonly occurring transactions such as direct debits and standing orders on both ledgers.


Monthly processing


If the business has staff users can use the Xero feature to monthly calculate all the necessary information and Xero payroll will automatically post the wages journals into the general ledger.

Where Employees are incurring personal costs on behalf of the business there is a separate mobile app that allows the employee to take a photo of the receipt and Xero will extract the key information and post it into Xero as an expense claim.



Quarterly processing

The VAT return facility allows the tracking of the ongoing VAT liability and any late adjustments and is easy to submit to HMRC. The user will just be required to review and then submit the figures to HMRC directly from within Xero. If they need to make an adjustment to a particular VAT box, they can particularly if they make advance payments to HMRC on imports. There is an EC Sales list found within Reports as well.

Transfers and journals are entered through + sign on the ribbon.

The test drive revealed that it was easy to use software and that is great for business!


Xero provides unlimited free 24/7 online support to all subscribers at Xero central. Any user within an organisation can contact for support and they do call customers when it helps. You can manage the cases you’ve raised in ‘my cases’. You can see the expected response time for your open case, it’s status, and review older cases at any time.

Response to forum FAQ’s are the same day and the company often gets testimonial from customers saying how good the forum has been.



They encrypt all data that goes between the business and Xero using industry-standard TLS (Transport Layer Security), so protecting personal and financial data. The data is also encrypted at rest when it is stored on their servers and encrypted when they transfer it between data centres for backup and replication.

Xero’s Security team continuously monitors security systems, event logs, notifications and alerts from all systems to identify and manage threats.

History and notes found and the assurance dashboard under the advanced accounting on the ribbon allows the user to view all adjustments to transactions and who made them.


Tools such as the dashboard, reports on activity, account transactions and journals help advisors monitor the integrity of data in Xero.


Data can be exported directly into Microsoft Excel for further analysis from any module.

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Cost saving benefits

  • Free lifetime forum support is at hand via user forums. These can be accessed by selecting ‘Help>Get Support from Xero central’ from the question mark in the top right-hand corner of the Xero company screen.
  • Pre printed stationery is not needed. With some packages you will have to add text fields to object headers so that you can use plain paper to print of documents.
  • You can select different invoice themes that can be used with different customers
  • There are 4 link fields on the contacts tab of suppliers and customers so you can associate other web pages or folders on your computer or specific documents such as contracts and terms and conditions with customer and supplier records (with a specific con­tact) to ensure that issues can be resolved quickly.
  • Access for unlimited users at no extra cost. This enhances cross company collaboration thereby adding value.
  • Unlimited, free 24/7 support
  • Every 3-6 weeks, the company releases innovative software updates based on customer feedback, improving functionality as well as adding new features and enhancements.
  • Users of Xero are allowed you to save all sorts of files against transactions for example Bills and contracts against their contract card within Xero. This cuts down on the paper storage

Time saving benefits

  • All the data is automatically backed up so you have no reason to pay for external drives
  • The user can create unique categories for transactions to suit your business needs.
  • In Sage you cannot move an item from one accounting group to another i.e. from current assets to current liabilities. You will need to set up a new account in the Current liabilities section of the nominal structure otherwise the chart of accounts layout will be un-auditable. In Xero you can.

Ease of use

  • The VAT configuration editor allows you to set the standard rate % applicable for a period.
  • It works on nominal codes and on account names a feature that helps non accountants who can get confused by codes.
  • Journals have an auto reversing facility; this is great for stock movements. You can also repeat, delete or void journals. Deleting journals keeps the Journal register clean.
  • The user can quickly move between different account types in the chart of accounts view – this helps non accountants who may wish to see the current balance on fixed assets, current assets etc.
  • Contacts in Xero for the three ledgers sales, purchases and employees have a very high degree of sorting by name and other data objects.
  • The software enables you to create primary and secondary contacts for each customer and supplier.
  • By selecting accounting and then reports on the ribbon you can set up multiple budgets and lock them to prevent future alterations.
  • You can specify the year end within financial settings. There is no yearend close-down so there is no need to purge the data. This is a huge advantage as the user can run multiple historical reports with all the P&L data still in the nominal codes.
  • Find and recode is a great facility and it enables users to find multiple transaction lines in bulk and allows them to recode the source transaction or recode using a manual journal.
  • Tracking in Xero allows the user to track 2 categories.  (e.g. Cost Centre and Department) with 100 options under each category.
  • There is a robust fixed asset module, that allows you to keep track of all assets along with their serial numbers and their warranties and effective lives.


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Ease of use

  • No pre-set journals, however, it’s really easy to create a repeating journal or to even copy a prior posted journal. We don’t need the VAT clear down journal as we only have one code for VAT. Depreciation again shouldn’t be a journal here as we have a great fixed asset module that automatically calculates and posts the depreciation.
  • There is no chart of account templates for companies in different industry sectors, but they do allow any chart to be used. Accountant’s will use their own chart that’s mapped to their accounts production system so both systems are in sync or they can use their current nominal codes e.g. Sage chart of accounts.
  • Xero does not have standard VAT rates for Europe, US Canada, Australia and New Zealand but you can amend the VAT rates depending on where you pay your taxes. In some regions they do this automatically (their main regions) and in others the end user will need to create the specific tax rates.
  • The + tab may be confusing as really this where journals and transfers are done.
  • The system cannot show only deleted transactions, but there is at present no pre-set report, but it can be easily produced. This is important from a fraud perspective. The remedy will be displayed on the Forum.
  • In Xero you cannot choose the language in which you wish to view the software and the vat codes for Europe, US Canada, Australia and New Zealand
  • You cannot create multiple delivery addresses and show them on a consolidated invoice. You will have to set up additional customers for the additional delivery addresses.
  • You cannot set automatic statements within the customer module Xero, but you are required to run these as and when required. They have automatic invoice reminders that can be sent based on certain criteria. The app marketplace can take care of automated statements if a business required this functionality.
  • Modules are not colour coded to this could help novice accounting users. If you are colour-blind this is no benefit.

Henry Hardoon BSc (Hon’s), FCA, FCCA, FAIA, FIMC-CMC, FIMIS, is an e commerce strategist and lecturer who is a quality advisor of the AIA and the senior partner at H & H Associates, an IMC registered consultancy practice. (Web site Http://www.hhassociates.co.uk)