I have zero reasons to suggest Xero, and I am genuinely disappointed.
When I opened my firm back in 2015, I happily chose to run it on Xero. At the time it was new, fresh, looked great, and few people were using it. This meant there was a potential advantage for being an expert in working with Xero. Moreover, there was a lot to like for my clients too. Most ended up going with their “standard” pricing at $30/month. This gave them the complete software, plus it included payroll for up to five employees. That was the edge that Xero held. An integrated payroll product for a limited number of employees at a cost that was cheaper than other software. And, it worked great for those clients.
Xero is a growing company itself, and they don’t try to hide it. They’re upfront with feature rollouts, and they’re even upfront about the somewhat lackluster payroll functionality that was once included. However, for the slightly lower price, it was worth the sacrifice and felt good to be on board with a growing company trying to grow, just like I am; as well most businesses out there.
No Longer Offering Payroll.
On November 1, Xero rolled out its new pricing structure. With it, Xero has decided to stop offering payroll. So, Xero seemingly admits defeat on payroll, and they announce they’re teaming up with Gusto. They probably have a partner deal that gives a break on pricing, either in Xero for not having payroll, or a discount to use Gusto, their new partner. No! They’re keeping the monthly cost at $30/month and no longer have payroll included. Also, no discount on Gusto either.
Now, I don’t have any problems with Gusto, but it’s a premium product that aims to incorporate an HR functionality (an excellent thing for many small businesses). If you’re unfamiliar with Gusto, they have a minimum $39/month fee plus a $6 fee per person being paid up to a $149/month fee plus $12/person being paid. Gusto is a good product and a full-service payroll solution. However, it’s a steep increase for a business that was paying $30/month for both payroll and accounting to now have to pay $30/month for Xero and $45+/month for payroll.
There are no pricing changes to either Xero or Gusto, but Xero is still growing. They must be including the new company they acquired, or the new features recently rolled out to the lower subscriptions.
Recent Purchase of Hubdoc
If you aren’t aware, Xero recently bought Hubdoc, a product that automatically imports all of your financial documents into one place. While I’m new to Hubdoc, I love learning to use new technology and seeing how it can benefit my clients.
Xero also rolled out two new features within Xero: Xero Expenses and Xero Projects. Xero Expenses will track time and expenses against each job for better records, invoicing and reporting. Also, Xero Projects will also improve the accounting function by allowing you to track and manage projects. Both are great additions to Xero and significant areas of concern for clients considering moving from Quickbooks. So, since the payroll got zapped from the $30/month subscription, least some must be added to that level to soften the blow of the customer now forced to shell out an extra $45+/month (Gusto’s price), right? No! The midrange subscription of $30/month receives nothing extra and loses out on payroll.
What about Top-tier Users & the Premium Subscription?
If you were at the top tier Xero subscription, you paid at least $70/month, which included payroll for up to 10 people. Now, you get a price reduction (kind of)! With that subscription, you’ll only pay $60/month. However, your payroll (through Gusto) would be $99/month ($39 plus $6/employee), so a significant increase in monthly expenses is the tradeoff.
However, the now-established premium subscription plan will get Xero Projects, and Xero Expenses included for FREE. Excellent, right? Well, consider that QBO’s top tier cost, QBO Plus, is only $50/month and provides project accounting; it’s less than stellar.
Lastly, consider Xero’s new acquisition of Hubdoc, which will continue at its regular pricing of $20/month. So, I don’t see how any customer will benefit directly from that acquisition.
Are there any Reasons why Xero might be better?
Let’s examine the mobile app. Xero is a modern, digital company, and the app must function better than Quickbooks online. Xero does have a leg up in that department, but in appearance only. While the Xero app is prettier than QBO, it’s inferior in every way. The Xero app has no reporting capabilities, so you can’t even check your P&L, and it has significantly less ability to do any accounting work compared to QBO.
So now, Xero has product solutions with less functionality and is still a company trying to make ground against the big player (Quickbooks) at a higher price. Yes, if you search for Quickbooks pricing, you will see that their midrange product is $35/month.
Now, you may be questioning my math skills, but let me explain. As a Quickbooks ProAdvisor, I get to offer my clients a 50% off subscription for the time they’re a client (or a client of ProAdvisor). So, now we’re comparing fewer features at $30/month to the industry leader at $17.50/month. Why would I have my client pay an extra $150 a year (it’s even more for Xero at the top tier) to be with Xero? Keep it in mind that Xero does offer a discount to Xero partners at certain levels. Some can give you a 15%, 20%, 25% or 30% discount, but even at a 30% discount, it’s still more expensive than QBO.
Reevaluating Your Bookkeeping Software
Are you feeling a little shocked and frustrated right now? You’re welcome! If you’re an existing Root client using Xero, we will be talking with you shortly if we haven’t already. If you aren’t a Root client, are you paying for QBO directly, or has your accountant never mentioned they can save you money?
Or, are you just tired of the bookkeeping taking too much time away from the CEO? It doesn’t matter. Take this as the perfect time to reevaluate your chosen bookkeeping software. Decide whether you need payroll or not and what the best combination of support services are for you. You might even realize you don’t look at your financials regularly and could benefit the most from going to a desktop solution that your accountant maintains.
So, if you find yourself or your company in a situation where you aren’t getting the right value or proactive support, we encourage you to reach out to us and see if we would be a good fit to help your company grow.
Know Your Options
Now, I admittedly mislead you about having zero recommendations for Xero. There are indeed instances where I think that Xero is the best option for a client. These instances are when clients can use their Xero partner plans. An example is clients that run a sole proprietorship or partnership and have no payroll. Also, they don’t need to send invoices through Xero and don’t have multiple projects or time to track.
The Cashbook Xero partner subscription will be $7/month and have all the positives (and limitations) of Xero without the ability to invoice clients. For those tracking at home, that’s more than the $5/month to get the self-employed version of QBO for my clients. So, the big difference is that Xero allows you to have a balance sheet.
It’s quite simple, really—pay more for more, not less.
Let Root Tax Help
Need help this tax season? Let us know when we can help by contacting us. We look forward to hearing from you!