Status: Actively Maintained & Sold
Founded in 2006, Xero is the fastest growing accounting software in the entry-level market space for small companies with (typically) less than 50 employees and less than $10 million in revenue. Headquartered in New Zealand, Xero has expanded rapidly to become a truly global solution – at least in the English-speaking world. The company has 700,000 subscribers (customers) supported by 1,400 employees.Xero claims to have 400+ add-on products in their app directory and 16,000 accounting and bookkeeper partnerships globally.
What separates Xero from others in the entry-level market is their global reach and focus on working through the accountancy (CPA) community with very strong, embedded tools to help the bookkeeper working on their clients who are also on Xero. This strategy is very reminiscent of the old days of accounting applications here in the USA where most publishers were offering some form of client write-up application to accompany their accounting software.
Xero launched in 2007 as a bare-bones SaaS accounting application in New Zealand with core financials, accounts receivable, and accounts payable with bank transactions. Reports were added shortly after the launch as were budgets, recurring invoices, and expenses. The UK version launched later that same year. Expansion to Australia occurred in 2008 and by the end of 2008 there was a Xero Global edition for other parts of the world. In 2009, fixed assets, multicurrency, and Paypal integration were added. Interestingly, Xero integrated with FreshBooks in 2009. Inventory was added in 2010 and expanded to the US in 2011. Xero went public in 2007 on the New Zealand Exchange and listed on the Australian Securities Exchange in 2012. Additional funding has been raised through the years including $23 million in 2009 from the founder of MYOB, another entry-level accounting application that once dominated the Australian and Pacific Rim market. Additional features including Payroll, mobile apps, checks, time sheets, and tax improvements and expansions were introduced (and continue to be added) for global geographies. Much of the new functionality came through acquisitions. Australian payroll provider Paycycle, Spotlight Workpapers, and WorkflowMax are among the larger acquisitions.
Xero is a decent product for small companies if you need basic accounting and maybe some light project features. It is not even close to the right product for a distributor of any consequence and there is no reason why any manufacturer should ever consider this product. With that said, Xero is simple and a great entry-level product for start-up companies with few employees and a simple business model. There are many apps in the Xero app marketplace to extend it. It’s interesting to see that Fishbowl Inventory has an interface for Xero. Fishbowl has a very nice light manufacturing and distribution application with a strong QuickBooks base here in the USA.
Target Company Size
We see Xero as clearly an entry-level product for companies with up to at most $10 million in revenue and under 50 employees. Our opinion is that Xero is really targeted to much smaller companies than that. While we are sure that there are larger companies using the product, the core functionality is severely limited – especially for a distributor or manufacturer.
In the early days Xero was deployed as a single database but has since been moved to Amazon Web Services as a true multi-tenant SaaS application with cells capable of supporting 100,000 subscriptions (individual accounts). The database is Microsoft SQL and much of the application is developed in Microsoft .NET. Xero has a peak under the hood at the underlying platform on their blog.
Xero is available predominantly in four markets: New Zealand, Australia, the United Kingdom, and the United States. However, their website claims that they have subscribers in 180 countries. There are only 196 countries in the world. We have serious reservations that Xero actually supports all 180 countries for tax and reporting purposes. As such, we strongly recommend that companies outside the four targeted markets evaluate Xero closely to determine if it fully supports your country’s legislative requirements. Xero does support a Canadian website so we are comfortable stating that it is available there as well as South Africa and most English-speaking countries.
Xero is available in three editions (see cost below). There are few add-on products available from Xero directly such as Payroll and business forms (checks). Most other add-ons are available through 400+ third party application developers listed on their app marketplace.
More than 700,000 subscribers access Xero across the globe. This is an increase of approximately 40% in about a year’s time from June 2015 to October 2016.
Xero is available in three editions. Starter Edition is just $9 per month and designed for the smallest of small or home office (SOHO) and sole proprietorships (limited to 5 invoices/month and 5 bills paid/month. Standard Edition is $30 per month and not limited by invoices or bills per month and is more comparable to entry-level versions of Intuit QuickBooks and Sage 50 US. Standard Edition but is restricted to payroll for 5 employees. Premium Edition expands Payroll to 10 employees and includes multicurrency support. Upgrades are available for payroll to as many as 100 employees and then $2 per employee up to a max of 200.