Moving from QuickBooks to Xero - One Year Later

In very late 2022, I started my transition from QuickBooks (online) to Xero for my financial software. I went live on Xero in January of 2023. It has now been a full year on the new package. Bottom Line: I love it. Bonus bottom line: No matter what happens in the future, I don't believe I will ever go back to QuickBooks or another Intuit product. And that feels good.

This blog has three parts: The decision to choose Xero over QuickBooks, the Transition from one to the other, and my final thoughts a year later. If you only care about the conclusion, feel free to scroll down.

Part One: The Decision

Like many of you, I hade been shackled to QuickBooks for many years. In my case, I bought my first license in 1995. Back in the days of QB Desktop, I skipped upgrades many times because the product was so expensive and the functionality I used never changed. For about ten years, I had a three-person license. when I sold my first IT company, I happily moved back to a one-user license.

Overall, QuickBooks has long been the leader for financial programs in the small business space. But many of us (perhaps most of us) consider it overpriced. And, in my opinion, the online product has never been equivalent to the desktop product. It is certainly slower, more cumbersome, and has fewer reports.

And so, like many companies that move to an online version, QuickBooks has opened the door for competition.

There's great irony in how QuickBooks contributed to their competition. Perhaps this will be a case study for future business schools. QuickBooks is famous for not working well across a network, for having poor customer service, and for being over-priced. "Everybody" used them, but almost nobody loved them.

Microsoft took a stab at this market, but didn't have a commitment to keep up the pressure. Microsoft Small Business Financials died at the end of 2008. Perhaps if they could have foreseen QuickBooks' fumbling into the cloud, they would have stayed.

QuickBooks had two options for "going to the cloud," and they picked the wrong one. They could have used a licensing model like Microsoft of Adobe, with software installed locally but the licensing managed in the cloud. Instead, they opted to keep the entire product in the cloud so they don't have to worry about keeping local files updated and secure.

Some people still use the desktop edition simply because the cloud version is so hard to love. If they had kept the program on site and moved licensing to the cloud, QB Desktop would always be fast and full-featured.

But the greatest bit of irony is that competitors don't have to be cheap in order to take business away from QuickBooks. In fact, they can be almost as expensive - because QuickBooks has built up decades of bad service and customer resentment.

I like to say, "They've worked very hard to lose my business. I don't want to disappoint them."

So, beginning January 1,2023, my companies moved to Xero.

This decision had been coming for a long time. I needed to find a product that fulfilled the requirements we have. It needed to be good at the features we use. And, like most small businesses, we never used all the features of QB - Desktop or Online. 

Note: We also looked at Freshbooks, but found it to be clunky and mostly featureless.

Part Two: The Transition

We signed up for Xero in December 2022, and configured it to fit our business. We officially finished 2022 on QuickBooks and Started running everything on Xero on January 1, 2023. This required us to stay subscribed to QB for a month so we could balance bank accounts and generally let everything settle so we could print out final reports for taxes, etc. 

Exporting the chart of accounts from QBO was easy. We also ran a complete P&L for the last two years, so we could easily highlight accounts that haven't been used in a while. If we need them again, we can create them again. Basically, it allowed us to import a clean chart of accounts.

We have never used account numbers since we didn't set them up long, long ago. Xero automatically created account number for our chart of accounts and I adjusted the number so it's easy to align Cost of Good Sold with the corresponding goods (and services) sold.

We hooked up Stripe, PayPal, and the Chase bank accounts. The transition was surprisingly easy as we entered the beginning balances on January 1st and all new transactions simply showed up as they occurred. 

We went through a nearly identical process for the list of products and services. So, we began 2023 with a nice, clean list.

Looking back, it was not as scary or nerve-wracking as I had feared to set up the new system and move everything over. It could easily be done without waiting for the new year. But it does make a nice break. And since we took months to make this decision, waiting was a minor inconvenience. We made a plan and executed it.

We found Xero extremely easy to use. We updated our in-house documentation for all daily and weekly tasks (for example, invoicing and cash flow). Running basic reports is easy and obvious. As with all software, some features are hidden in places that are not obvious to new users. But, again, we wrote our version of documenting our processes using the new Xero product. That made the transition quite smooth.

I would say our "transition" period continued until we had run all reports for the first month, first quarter, first tax filing, and the first quarter's payroll.

One very important part of the transition was creating "rules" on the fly. When a transaction showed up on a bank account, we had to define how Xero would identify transactions like that. For example, when a sale for membership showed up in PayPal, it needed to be added to the appropriate account in the chart of accounts. And when an invoice was created for the sale, the connection between the sale and transaction needed to be identified.

Xero is much, much better than QuickBooks with rules like this! I was shocked at how much better it is. After just a few months, pretty much everything just flowed as it should. A few rules needed to be tweaked, but the logic is detailed enough that things just showed up where they should. We still approve almost everything with human acknowledgement, but 99% of the time, Xero identifies what each transaction is and properly adds it to the appropriate account. It is also about 98% accurate on pairing transactions with invoices, which is impressive since we have thousands of transactions for the exact same dollar amount.

Part Three: Final Analysis One Year In

As you can imagine, my prep work (importing a clean list of accounts and items/products) was time well spent. This made the training of staff on the new interface much easier. We did have to enter a number of things by hand as they came up, but this was not unexpected.

Overall, it was pretty easy to learn how to generate all the reports I needed. It did take about one calendar quarter to feel that everything was in place and that all reports have been generated at least once. That would be the same with any QB alternative.

Hardest part of the first year: It takes time to figure out where things are and how to do the same thing in a new system. This was expected.

Best part of the first year: The Rules mentioned above. After training, Xero is phenomenal with properly identifying sales, money transfers, and transactions within and between bank accounts. Our experience is that this process is so good that balancing three bank accounts takes about five minutes total. With QuickBooks, this could be an hour or more per bank account. For this reason alone, we LOVE Xero.

Worst part of the first year: After a year, I still find that a number of features are hard to find. Yes, it's an unfair comparison since I used some form of QuickBooks for 27 years. But Xero is one of those software programs that places one set of controls in the obvious menus and another set of controls in a completely different, rarely-used location. When I try to do certain things, I Google how to do things in Xero.

For non-technical people, this is a clear sign that the program was written with a lot of programmers talking to each other and not enough input from end users. It will get better over time, but it's a never-ending, low-level of frustration. (For me, anyway.)

But let me be clear: This "worst part" is not bad at all. The well-hidden second set of controls is filled with less-frequently-used features. So it's not that big of a deal

Overall: I think I switched to Xero at the right time. It was a surprisingly easy transition, in large part because I took my time to prepare the move. I have no idea how good or bad Xero was before I signed up. But today it is a great replacement for QuickBooks at a lower price.

We waited until we were sure that Xero integrated well with all the software we use for sales, banking, web sites, training, products, services, and so forth. QB has been the standard in part because it plugs into everything. Xero plugs into everything we use.

I do have to make a note on customer service because this is one of the greatest frustrations with QuickBooks an Intuit. Intuit is famous for having some of the worst customer service in the world for more than thirty years. They might actually have the worst service of any popular company in history. They are the market leader despite horrible service.

This question is basically irrelevant with Xero. I found all the answers I want on their help menus, in their videos, and sometimes via Google search - which led me back to the Xero site. I entered exactly ONE service request to Xero itself and received the correct help within three minutes. I've had zero disasters, zero crashes, zero data corruption. 

I admit that I'm comparing twenty-seven years with one product and fourteen months with another. But my businesses and accounts are as complicated and busy as they've ever been. And Xero just works. So I haven't had problems that require "customer" service.

I am a fan of Xero and my experience has been very positive. If you're thinking of a QuickBooks alternative, you should take a look. I can't promise it will work for your business, but it certainly works great for mine.

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Some of the "back story" in this post was previously addressed in my newsletter, which you can subscribe to at https://www.smallbizthoughts.com/newsletter

You can find out more about Xero at https://www.xero.com.

This article is not an endorsement or a paid placement. I am not claiming that Xero is right for your business (I can't promise it's right for mine). I'm just letting you know what I'm up to.

Comments and questions welcome.

:-)