Best Accounting Software 2021

Xero vs. FreshBooks

Is Xero or FreshBooks the better solution for you? This in-depth, feature-by-feature breakdown will help you select the best accounting software for your business.

All businesses should use an accounting software to manage and track their finances. As a business owner, you’ll use the software to send invoices to clients, upload receipts, and input general financial information into the database. Your bookkeeper or accountant will likely be given access to the platform and will likely do most of the heavy lifting regarding the reporting, tax forms, and more.

Most accounting solutions include features like invoicing, expense tracking, accounting reports, payroll, and accounting or bookkeeping services. Some accounting tools are designed for specific industries, but Xero and FreshBooks can both be applied to businesses of all types. Whether you’re in ecommerce, retail, or consulting, you could use either of these options.

This article will discuss the main differences between Xero and FreshBooks by highlighting differences in features, price, and usability. We’ll highlight notable strengths and drawbacks of each tool and make recommendations to help you pick the best software for your business.

Xero & FreshBooks Comparison Summary

Xero and FreshBooks are two accounting tools that we researched and tested in-house. Xero received a SoftwarePundit Analyst rating of 91 and FreshBooks received a rating of 86.

Xero received a higher rating because it includes inventory management features, which FreshBooks doesn’t have. Additionally, Xero offers more functionality in general. FreshBooks has a lower rating because, while it’s a solid starter tool, it’s not quite advanced enough for non-service-based businesses.

Here’s a breakdown of our review criteria and how Xero and FreshBooks performed in each category.

CriteriaAnalyst RatingFeaturesUsabilityPricingCustomer Support

Xero is one of the best accounting software tools for small businesses. With a full set of features that includes payroll, project tracking, and payment processing, it’s a one-stop accounting tool. Xero also finds a healthy balance between feature richness and ease of use. Pricing begins at $11 per month for five bills and 20 invoices, and the plans get more advanced as the price increases. Prospective customers can try the tool free for 30 days.

FreshBooks, on the other hand, has one of the fastest and easiest invoicing processes across accounting tools. It has fewer capabilities than Xero, and does not include features that are advanced enough for companies who sell physical items and need to keep track of inventory. FreshBooks pricing begins at $15 per month for basic features and tops out at $50 per month.

Here are a few quick points to summarize who we recommend each tool for:

You'll prefer Xero if:

  • You sell either products or services
  • You want an advanced yet user-friendly software
  • You want access to 800+ application integrations

Try Xero Today

You'll prefer FreshBooks if:

  • You are a service-based company
  • You’re a freelancer or have fewer than five employees
  • You need to implement an accounting tool in one day

Try FreshBooks Today

Table of Contents

Who Should Purchase Xero?

We recommend Xero to businesses of any size and industry. With inventory management features that FreshBooks lacks, this tool is ideal for those that sell physical goods, though companies that require the utmost detail may find that it falls short. Xero is extremely well-priced for the functionality that you get, and we found it very easy to use in spite of it being one of the more advanced tools on the market.

During our testing, we found that the biggest drawback is that it’s a bit difficult to get in touch with the customer support team. However, we found no significant software issues. We interviewed multiple customers who are extremely happy with the way Xero works for their business. Cheree Hill, the owner of Tranquility Bookkeeping Services, uses Xero for all of her clients and finds it incredibly easy to categorize transactions.

Who Should Purchase FreshBooks?

Though notably basic, FreshBooks is a reliable starter tool for those who are just starting out with accounting software. The main value of using FreshBooks is having a software that takes mere minutes to set up and begin using for your business. Creating and sending customized invoices is incredibly easy. The project management and time tracking features are particularly helpful because that isn’t found for free in all competitors. It’s priced fairly similarly to Xero, which is a drawback as it offers fewer features and details.

FreshBooks customers that we spoke to emphasized that FreshBooks is simple with limited functionality. It lacks inventory management features, which will limit the types of businesses that will find significant value in the platform. Overall, FreshBooks is a solid starting option for those who need to get up and running with accounting software in just a few minutes.

Xero & FreshBooks Price Comparison

Xero and FreshBooks operate on pricing tiers, and both tools have three pricing plans to choose from. Xero is just a bit more expensive per month than FreshBooks.

Xero Pricing Details

Xero pricing details are outlined below. The least expensive plan is $11 per month and the most expensive is $62 per month. We found that the Established Plan—the $62 plan—offers the best value given the wide range of included features like receipt capture and project management.

Early Plan
  • $11 per month
  • Send up to 20 invoices
  • Enter five bills
  • Capture receipts and bills with Hubdoc
Growing Plan
  • $32 per month
  • Unlimited invoices and quotes
  • Unlimited bills
Established Plan
  • $62 per month
  • Track projects
  • Claim expenses

FreshBooks Pricing Details

FreshBooks pricing begins at $15 per month for the Lite Plan and costs up to $50 per month with the Premium Plan. The pricing plans and structure are relatively similar to Xero’s plans.

Lite Plan
  • $15 per month
  • Invoices for five clients
  • Track expenses
  • Send estimates
Plus Plan
  • $25 per month
  • Bill up to 50 clients
  • Recurring billing
  • Give accountant access
Premium Plan
  • $50 per month
  • Bill unlimited clients
  • Manage projects and track time
  • Late payment reminders

Xero & FreshBooks Feature Comparison

Both platforms offer a similar list of features. Xero offers significantly more pre-built integrations with the Xero Marketplace, with over 800 connections with third-party tools. With Xero, you can also add payroll with Gusto for $39 per month.

Expense TrackingYesYes
Accounting Reports50+~20
Vendor & Client CRMYesYes
PayrollYes - GustoYes - Gusto
Project TrackingYesYes
Time TrackingYesYes
Receipt CaptureYes - with HubdocYes - basic
Inventory ManagementYesNo
Accounting & Bookkeeping ServicesNoNo
Mobile ApplicationYesYes
Accountant AccessYesYes

Top Features: Xero

Xero’s top features include the dashboard, products and services list, and the Xero Marketplace. Xero also comes with more than 50 financial reports, which is significantly more than FreshBooks offers. We’ll describe these features and show images of what the platform looks like to give you a sense of what it's like to use the tool. For a full description of Xero’s features, check out the full Xero review.


Xero’s dashboard, though not the best across accounting tools, still provides a helpful overview of your business with graphs and statistics about your cash flow, invoices, bills to be paid, and more. The dashboard is also customizable, allowing you to choose what’s displayed first.

Xero Dashboard

Products and Services

As mentioned before, Xero offers more advanced inventory management features than FreshBooks, which is relevant regarding products and services. With this section, you’ll mark the unit price of the goods, assign sold items to a cost of goods sold account, assign a tax rate, and then track items with Xero’s tracked inventory asset section.

Xero Inventory

Whether you sell products or services, Xero will work for you. While the inventory management isn’t the most advanced on the market—for example, Zoho Books is much more nuanced—it’s a viable mid-tier choice.

Xero Marketplace

The Xero Marketplace has integrations with third-party applications across categories like payroll, time tracking, payments, and more. It’s also helpful that Xero categorizes tools that are relevant to different industries like health, hospitality, and retail.

Xero Marketplace

Top Features: FreshBooks

The clean, modern, and easy-to-navigate interface is the best part of using FreshBooks. There are not as many details or integrations as Xero. However, it’s got all the required features to bill clients, track expenses, and manage projects. For a more in-depth overview of features offered by FreshBooks, check out the full FreshBooks review.


Invoicing with FreshBooks is incredibly efficient and easy. You can lightly customize each invoice to include your company logo, assign issue dates and the frequency of billing, and add all items to the invoice. When we created and sent invoices to clients, we found that they were delivered instantly.

FreshBooks Recurring Invoice

Project Management & Time Tracking

Keeping track of projects, and the time spent on those projects, is key for ensuring accurate billing. You can either assign hours to a project after the fact, or time a project live if you are completing a project for a client in real time.

FreshBooks Time Tracking

This section is particularly helpful because you can automatically generate an invoice directly from this section, which will pull the project information and the time spent.

Accounting Tools

FreshBooks includes around 20 accounting reports to help keep your business on track. You’ll invite your accountant to access the FreshBooks dashboard, where they’ll manage your Chart of Accounts and access other reports.

We found that, though there aren’t as many reports as Xero offers, there are still crucial reports like the Balance Sheet, Accounts Payable, Accounts Receivable, and more. Unless you need to generate particularly advanced accounting reports, this section should suffice for small businesses.

Bottom Line

Compared to FreshBooks, Xero is a more powerful accounting software tool that will likely be better for most businesses. It offers more features for a very similar price as FreshBooks, and many bookkeepers and accountants are trained in using Xero.

FreshBooks, on the other hand, is a modern platform that will work for freelancers and those who have service-based businesses. If your ultimate goal is to have an entry-level software, FreshBooks is an ideal starter option.

  • Xero is one of the best accounting tools for small businesses with a full set of features and integrations with over 800 third-party applications.
  • FreshBooks will benefit companies who need a starter accounting tool with receipt capture functionality.

If you’re interested, visit Xero or FreshBooks today to get started.

Katelyn Anderson

Katelyn is a Junior Research Analyst at SoftwarePundit, where she conducts in-depth analyses of technology markets & products and writes software-related content. She graduated summa cum laude with degrees in English and Psychology. Her main areas of interest are content creation, user experience, and search engine optimization. You can connect with Katelyn on LinkedIn.

Katelyn is an expert in several software categories including:

  • Accounting software
  • Integration software
  • Live chat software
  • Vacation rental software
  • Video conferencing software

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