Wow!  Have you ever seen such beautiful cloud accounting software?


Here at Aiteo we like to think we are beautiful accountants. You can take our word for it, or if you insist, check out our beautiful profiles <HERE>.  And if we haven’t put you off your dinner yet, here’s our review of some equally beautiful accounting software, Xero!

Not only is it beautiful but Xero’s popular too. The firm recently announced they have passed 130,000 customers in the UK, confirming their place as the UK’s market leader. So is the beauty just on the outside, is there some real substance and brains there too?

Join us as we go under the skin of Xero.

Give Me The Headlines

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A resilient, flexible and scalable cloud platform with a significant worldwide presence and large add-on market place.
Who’s It For?


Xero’s marketing and advertising targets the full SME range, which is a broad market from one-man-bands up to larger SMEs with turnover north of £1m. But with platforms such as Reckon One and FreeAgent nibbling away at the smaller end of the market, and ERP-level systems such as Exact and (too an extent) NetSuite pushing in at the top, it’s sometimes difficult to pin down exactly which part of the market Xero is best placed to serve. We put it somewhere in the middle – there are better options for contractors and professionals, so Xero is at its best when used in small but growing businesses.

What Does It Cost?


There are 3 pricing structures.  The Starter package is £10 per month but is limited to only 5 sales invoices, 5 bills and 20 bank transactions per month.  The Standard package at £22 per month, removes these limits and includes all the features except for multi-currency which is available with the Premium package at £27.50 per month.

In addition Payroll within Xero is charged at £1 per employee per month and direct bank feeds from some banks incur fees of between £1 and £3.50 per account per month (free feeds are available via Yodlee, see details below).

A summary of current pricing and features is available HERE.

Beautiful is rarely cheap and there have been murmurs of discontent around the pricing recently when it was increased at the beginning of July, however, we feel its broadly in the right ballpark.  Xero may work out slightly more expensive than its biggest rival QuickBooks Online (depending on your chosen subscription), but when looking at accounting software we believe it’s much more important to get the right software for you and your business – and to know what you get for your money – than simply to save a couple of pounds a month.

You probably won’t be surprised to hear that we strongly recommend you subscribe to Xero (or indeed any other package) through your accountant.  This will ensure you receive the appropriate support, accountancy advice, tax filing and associated subscriptions to automated book-keeping and other add-ons. If you don’t yet have an accountant, details of our own services can be found HERE.

OK, Give Me More Detail


Before we proceed, relevant disclosures. We are certified cloud accounting platform partners of Xero, QuickBooks Online and FreeAgent.  However, at the heart of our service is the commitment always to provide impartial and tailored advice on all the relevant products in the market.  We only recommend products we believe are suitable for our customers’ requirements, and if that’s not one of our platform partners, so be it.

So let’s take a look at those beautiful features:

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There is a standard chart of accounts which should cover the majority of requirements for most users but this can be fully modified based on your specific circumstance (we recommend you take advice from your beautiful accountants before modifying).

Journal entries are available but again this is an area where it is important that you know what you are doing, for example you wouldn’t do your own nose job you’d consult a plastic surgeon; in this case consult your accountant!

Sales & Purchases

When liaising with customers Xero makes it easy to present your business in the best possible light with beautiful looking documents.  They have close to fully bespoke quotes which, once approved by the customer, can be seamlessly converted into invoices.

If you regularly sell the same product / service to the same customer Xero makes it easy to charge them with recurring invoices.

If you sell the same product / service to multiple customers at once, again, Xero makes it easy to charge with multiple invoices to different customers.

As with other cloud accounting platforms such as QuickBooks Online and FreeAgent, Xero accepts online payments (via third parties) and has a basic level of auto-chasing of invoices.  Where it stands out from its competition is the customer portal where customers can see all their outstanding invoices and, in our humble opinion, it has better facilities for producing customer statements.

Provided that you have purchased the Premium Package then Xero allows the production of foreign currency sales and purchase invoices automatically accounted for at the prevailing exchange rates.

If your business issues purchase orders, Xero can do this.  It also deals with expenses, credit notes and repeating purchases (eg fixed monthly accountancy fees).

You can set up payment reminders so that you’re always up to date, schedule payments and produce batch payment instructions for your bank.

Workflow can be built in to Xero so that quotes, sales invoices, purchase orders and expenses can be sent for internal approval before they are issued to the client / supplier.

One blemish on Xero is that it doesn’t deal with CIS (construction industry scheme) and workarounds are required.


Xero enables the easy recording of fixed assets and the associated depreciation too.  Where necessary Xero can process accruals and prepayments.

Make reliable plans through Xero with whole company budgets and team or event mini budgets.

With the Premium package Xero fully accounts for multi-currency dealing with purchases, sales, bank accounts and exchange profit/losses all using exchange rates for over 160 currencies updated hourly from

Xero allows the calculation and then submission of VAT returns directly to HMRC with just a few mouse clicks.

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A great feature of many cloud accounting platforms is direct bank feeds.  With these once a transaction occurs through the bank account the data is transferred and is shown in the bank account on the cloud accounting platform ready for you to allocate.  Xero benefits from direct bank feeds from:

  • Barclays
  • HSBC
  • Metro Bank
  • NatWest
  • RBS
  • Santander
  • Silicon Valley Bank

You are charged extra (ranging from £1 to £3.50 per account per month) for some of these direct feeds, this is fair enough as we understand that Xero has to pay to have the direct feeds but we aren’t happy that these prices don’t seem to be easily accessible until you come to set up the bank feed, we really had to dig hard to find them out.

Alternatively, free bank feeds are available through Yodlee, a third party service used by many cloud accounting platforms which pulls bank feeds from the bank in much the same manner (nearly all UK banks are supported).

A final option available is to manually downloaded bank statements in CSV format from your bank and then manually uploaded manually into Xero, but if you do this you’re missing out on the benefits of the direct or Yodlee feeds.

One area we think Xero is ahead of its competition is bank reconciliations.  As is common in the cloud accounting platforms transactions are allocated through the bank reconciliation process (don’t forget, the bank transactions are coming through promptly with direct feeds or Yodlee described above).  You can set up bank rules to allocate transactions and auto reconciliation suggests allocations learning from previous entries.  Whilst other cloud accounting platforms have similar functions they just seem smoother and more intuitive on Xero.

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Xero is broadly comparable to its cloud accounting rivals for its payroll.  It is able to run multiple payrolls, either weekly, fortnightly or monthly.  It caters for hourly paid employees with facilities to submit timesheets and it can also monitor holiday requests.

However, it is fair to say that, along with its rivals, it is significantly behind in functionality compared to specialist payroll software.   Sadly, they all seem to be more plain Jane than beautiful in this area.  Any specialist adjustments, such as redundancy, sick pay or maternity pay, requires manual calculations and inputs.

We feel that payroll on Xero is only really suitable for businesses with one or two employees with straightforward requirements.  For anything more than that we’d recommend using one of the many payroll add-on apps that fully integrate with Xero.

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This is really where Xero is trying to earn that beautiful tagline.  They are making reports that are easy on the eye and won’t horrify the less financially minded.  Xero boasts a huge selection of reports, which are easily exported.  They can be customised for your circumstances.

And Xero developers are continuing to work in this area, released to the UK only last month (26 July 2016 in fact) is Report Templates.  This is really for accountants to allow them to have set reports which are similar for all their clients but still with ability to do some customising for each client.  This should mean that accountants can more quickly produce reports for all their clients.  Something for us to play with!

Historically, when comparing QuickBooks Online (QBO) and Xero, we would have always said QBO was well ahead with its reporting and customising functionality. But Xero is catching up and there’s not so much of a gap between them now.

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There is a huge searchable knowledge base with easy to read help articles and wherever you look there’s short videos (usually 1 or 2 minutes long) showing you how to actually do what you’re reading.  There are more video guides on Xero than we have found at any other rival.  In general, we’ve always been able to quickly and easily find an answer to most issues we’ve faced.

There’s also users message boards to share information with other Xero users.

Sadly, for those of us who like to chat things through, Xero does not have phone or live chat support, however, they do have employees often on the message boards and email support which, we’re told, they answer quickly (we haven’t stress tested it yet).

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Xero’s mobile app allows you to do key tasks on the go. It’s a little bit more limited compared to the desktop version but is developing all the time.

Xero really is a super model when it comes to the add-in marketplace.  It is fair to say that it is huge and growing, with over 500 add-ons available at the time of writing! This is great as you can really get this information working for you and maximise all available automation and time saving. On the down side it can be a bit daunting with so many apps doing similar things; there are user reviews and star ratings to try and lead you through. If you do need lots of add-ons it may become costly and at some point you might start to consider the benefits of an enterprise-level ERP package instead.

Xero has basic inventory management where the value and quantity of inventory can be tracked (using the average cost method, if you’re interested).  However, it doesn’t deal with manufactured goods or provide full inventory management (eg tracking where stock is, low inventory warnings, optimal buying indicators, track individual items, etc), you’ll need to choose an add-on for that.

What It Doesn’t Do

Platform providers have to make choices in respect of their target customer market and thus decide which system functionality is (and isn’t) going to be developed. With Xero some areas have been de-prioritised. We briefly identify some elements for possible further development.

One feature we would like to see added is for limited companies to be able to prepare, issue and minute dividends from within Xero.

Another is better facilities for accounting for projects, and the ability to record your time spent on a client and then easily invoice them for it.

Xero doesn’t complete your corporation tax return or prepare annual accounts for submission to Companies House but accountants will probably have heard that Xero have announced integration with Digita Accounts Production to assist accountants in producing year end accounts.  To be honest we think that’s the right way to go about it as most businesses using Xero will need the expertise of their accountants to finalise these anyway, they’re not things you want to get wrong.

What’s Coming Next?

Xero are continuing to develop their mobile app.  There is the much rumoured update to better deal with CIS.  The payroll surely is being updated.

Xero appear to be pressing ahead with global expansion.  Originally from New Zealand, they have a strong presence down under.  They are looking to continue to grow particularly in the USA where the market is huge but they are only a small player.

We’ll update this blog post periodically to reflect the latest position (latest version: August 2016).


In a Nutshell

Xero is the market leading cloud accounting software in the UK with an impressive comprehensive offering and add-on marketplace.  Certain functions, particularly payroll, are not as good as we’d like them to be but others, such as reporting and bank reconciliations, are better than most competitors.

For SMEs that are large enough to have an accounts department but not large enough to need an ERP Xero really is one to consider.

About Aiteo Consulting

Aiteo Consulting provides outsourced CFO services and finance functions to innovative and motivated Tech and FinTech businesses. So whether you’re in start-up mode, or are running a growing enterprise which is pushing through to the next level, we can help you understand how cloud accounting can dramatically improve your efficiency, save you time and make real improvements to your bottom line.