Are you wondering what is Xero? This powerful cloud-based accounting software saves businesses over 10 hours each month by automating tedious bookkeeping tasks. Based in New Zealand, Xero is designed for businesses of all sizes, particularly small and medium enterprises looking to streamline their financial management.
What is Xero accounting software exactly, and how does it work? At its core, Xero is a comprehensive financial platform that automates invoicing, supports multiple currencies, manages inventory, and provides real-time analytics. What is Xero used for? Small business owners rely on it for everything from expense tracking to generating over 40 standard financial reports. Additionally, the software integrates with more than 1,000 third-party applications, making it incredibly versatile. What is Xero software for small business? It’s an affordable solution starting at just $1 per month for the Early plan—significantly less than the regular $20 price—while still allowing unlimited users across all pricing tiers.
In this article, we’ll explore Xero’s time-saving features, who benefits most from using it, and how its mobile capabilities let you manage finances anywhere. We’ll also break down the pricing options to help you determine if Xero is the right accounting solution for your business needs.
What is Xero and how does it work?
Xero operates as a cloud-based accounting platform that fundamentally changes how businesses manage their finances. Understanding what is Xero and how does it work requires examining its core architecture and functionality.
Cloud-based access across devices
In essence, Xero eliminates traditional software limitations by operating entirely in the cloud. Unlike conventional accounting systems that require installation on specific computers, Xero stores all financial data on secure online servers. This approach means business owners can access their accounting information from any web browser or through the dedicated mobile app. Whether you’re using Windows, Mac, or mobile devices, Xero ensures consistent functionality without version control issues. Moreover, this cloud foundation means no hardware requirements or complex setup processes—simply subscribe to the service and begin managing your finances immediately.
Real-time data sync and collaboration
Xero’s platform processes transactions, updates records, and generates reports instantly. This real-time capability ensures everyone working with your financial data sees the current state of your business finances. Furthermore, multi-user access makes collaboration straightforward between team members and advisors. When changes occur, they synchronize automatically across all access points, creating a single source of financial truth. Notably, data syncs occur securely without requiring your local network to be accessible from outside. For businesses with remote teams or external accountants, this means everyone works with identical, current information regardless of location.
User roles: Standard, Adviser, Admin, Read-only
Security and appropriate access control are managed through Xero’s structured role-based permissions system. Each role provides specific functionality:
- Standard Users – Handle daily accounting tasks including managing invoices, bills, and viewing bank transactions
- Advisers – Specialized access for accounting professionals to view financial reports and provide guidance without necessarily modifying data
- Administrators – Maintain complete system control, including user management and security settings
- Read-Only – View accounting data and reports without editing capability, perfect for stakeholders who need visibility without modification rights
These permission levels ensure businesses can share financial information appropriately while maintaining security. In fact, the flexibility of these user roles makes Xero ideal for collaboration between internal teams and external financial professionals.
10 Time-Saving Features in Xero Accounting Software
Xero’s platform offers specific functionality that dramatically cuts down on administrative time. Let’s explore the features that make Xero accounting software a time-saver for businesses.
1. Automated bank reconciliation with rule-based matching
Xero’s bank reconciliation tool uses AI-powered suggestions and bank rules to match transactions automatically. This feature alone helps 89% of small businesses save significant time on bookkeeping. The software matches your bank data with bills, invoices, and receipts, enabling you to update records instantly rather than manually entering each transaction.
2. Recurring invoice scheduling and reminders
Creating templates for repeating invoices eliminates manual invoice generation. Simply set up invoice details once, and Xero automatically generates and sends them based on your schedule. This ensures consistent, timely invoicing while maintaining a steady cash flow.
3. Smart expense tracking with receipt capture
The receipt scanner feature lets you photograph receipts with your mobile device, automatically extracting vendor, date, and amount details. This eliminates manual data entry and reduces errors when submitting expense claims.
4. Cash flow forecasting dashboard
Xero’s dashboard provides visual representations of your balance in real-time and projected cash flow for the next 7-90 days. This helps you spot potential issues before they happen and plan your spending accordingly.
5. Batch bill payments and approvals
Process multiple bills simultaneously with batch payment functionality. This feature streamlines the approval workflow and reduces time spent on individual payment processing.
6. Multi-currency support with live exchange rates
Conduct business globally with support for over 160 currencies. Xero automatically updates exchange rates hourly, eliminating manual currency conversions and keeping financial reports current.
7. Inventory tracking with auto-reorder alerts
Configure reorder points for inventory items to receive automatic alerts when stock levels drop below defined thresholds. This prevents stockouts while optimizing inventory across different locations.
8. Payroll integration with Gusto
Businesses using Gusto spend 75% less time managing employee payroll. The integration syncs payroll data to Xero as bills or manual journals, automating this time-consuming process.
9. Custom financial reports and templates
Create reusable report layouts tailored to your business needs for faster generation of key financial insights.
10. Mobile app for on-the-go accounting
Manage finances anywhere with the Xero mobile app. Monitor cash flow, create invoices, reconcile transactions, and track expenses directly from your smartphone.
Who uses Xero and why it fits small businesses
A diverse range of businesses rely on Xero’s accounting platform, each benefiting from its customizable features for their specific needs.
Freelancers and solopreneurs
Freelancers find Xero particularly valuable for managing variable income streams. The platform enables self-employed professionals to create professional online quotes that easily convert into invoices with multiple payment options. For solopreneurs concerned about collecting payments, Xero’s aging summary reports clearly identify late payers at a glance. Beyond invoicing, freelancers appreciate the automated bill payment scheduling that prevents missed deadlines and the ability to set aside funds for taxes—a crucial aspect of self-employment financial management.
Retail and ecommerce businesses
Retail businesses utilize Xero to monitor their financial health through an intuitive dashboard that displays the impact of sales and expenses on cash position. Online sellers benefit from Xero’s multi-currency support and integration with major platforms like Shopify, Amazon, eBay, Walmart, and Etsy. Subsequently, these integrations sync transactions automatically, providing real-time profit margins and financial records without manual data entry. Inventory tracking across multiple channels and locations gives retailers a comprehensive overview of their business performance.
Service-based companies with remote teams
Service businesses with remote teams leverage Xero’s cloud-based architecture for collaborative financial management. Companies like consulting firms, marketing agencies, and IT services customize the platform to match their unique workflows. Project cost tracking allows them to monitor time and expenses by client, whereas automated billing through scheduled recurring invoices streamlines ongoing client work. Practice-wide reporting generates financial insights across all clients.
Nonprofits and educational institutions
Nonprofits receive a 25% discount on Xero business pricing plans. Educational institutions and charities use Xero to share financial reports with board members, donors, and volunteers with a single click. The platform assists with tracking various revenue sources including pledges, donations, volunteer time, membership dues, and grants. Certainly, Xero’s budgeting tools allow nonprofits to track funds across multiple campaigns and compare planned versus actual spending.
Xero integrations and pricing overview
Expanding Xero’s capabilities is possible through its extensive integration ecosystem and flexible pricing options. These elements together determine what is Xero’s true value for your specific business needs.
Popular integrations: Brex, Hubdoc, Tipalti, Salesforce
The Xero App Store houses over 1,000 integrations that transform what is Xero accounting software into a complete business management platform. Hubdoc, Xero’s data capture tool, streamlines document management by automatically extracting financial data from bills and receipts. Besides document management, Brex integration saves users “hours at month-end” through automatic bank feed connections and custom configurations for transaction information. This makes Brex “one of the most advanced Xero integrations in the US.”
Tipalti extends what is Xero used for by providing robust payables automation. With Tipalti, businesses reduce errors by 66% and spend 80% less time on payables processing. Furthermore, companies close their books 25% faster with automated global payment reconciliations. For customer relationship management, Salesforce integration synchronizes customer payment details directly into your CRM system.
Pricing tiers: Early, Growing, Established
Understanding what is Xero software for small business requires examining its pricing structure:
- Early: Usually $20.00/month (promotional offers available for as low as $2.00/month), includes 20 invoices, 5 bills, basic reconciliation, and Hubdoc integration
- Growing: Standard price $47.00/month, offers unlimited invoices and bills with all Early features
- Established: $80.00/month, adds multi-currency support, project tracking, expense claims, and advanced cash flow predictions with Analytics Plus
During promotional periods, Xero occasionally offers up to 90% discount for the first three months.
Add-ons: Payroll, AP automation, CRM tools
What is Xero and how does it work with add-ons? Xero partners primarily with Gusto for payroll solutions, automating payroll calculations and syncing details to Xero as bills or manual journals. This integration uses “one login” with Xero credentials working for Gusto access.
For accounts payable automation, third-party options like Tipalti offer “end-to-end payables processes” with features including supplier onboarding, automated invoice processing, and global payments to 200 countries in 120 currencies. HubSpot represents one of many CRM tools that pair with Xero, ensuring customer payment details automatically update in your customer database.
Conclusion
Xero stands out as a powerful financial solution that truly delivers on its promise to save businesses valuable time. Throughout this article, we’ve examined what makes this cloud-based platform particularly effective for small businesses seeking streamlined accounting processes. Most importantly, Xero’s automation capabilities across bank reconciliation, invoicing, and expense tracking eliminate hours of manual work each month.
Small businesses certainly benefit from Xero’s flexibility and scalability. The software grows alongside your business, offering tiered pricing options that match your evolving needs. Additionally, the extensive integration ecosystem transforms Xero from a simple accounting tool into a comprehensive business management platform.
Regardless of your industry—whether freelancing, retail, service-based, or nonprofit—Xero provides tailored solutions to address specific financial management challenges. The platform’s accessibility across devices ensures you maintain complete control over your finances anytime, anywhere.
Overall, Xero represents more than just accounting software; it serves as a strategic partner that empowers small businesses to focus on growth rather than paperwork. The time-saving features, collaborative capabilities, and customizable options make Xero a worthwhile investment for businesses seeking financial clarity and operational efficiency. After all, those 10+ hours saved monthly add up to valuable time better spent building your business.