I have previously written articles on small business accounting software: http://www.asifism.com/accounting-finance/small-business-accounting-software-quickbooks-vs-sage-vs-peachtree-vs-microsoft-office-accounting-%e2%80%93-part-two/ and http://www.asifism.com/news-about-this-site-and-me/accounting-quickbooks-sage-peachtree-or-microsoft-office-accounting-part-one/.

These articles primarily discussed desktop based accounting software: they pitched quickbooks against sage and microsoft accounting. Clearly, many small business owners and accountants alike preferred microsoft accounting and quickbooks to sage (which sane person wouldn’t, right?). However, in light of the small business accounting market not being so profitable, microsoft has deserted the small business community, handing over the management and future development for microsoft accounting to partners (mamut software) in the UK. We had been using microsoft accounting to manage everything, including payroll, so it was a bit of a pain when microsoft chose to ditch the not so cash rich software over ’some’ of us dedicated customers (or partners, as we’re both).

Now, as an application development company ourselves, we have been integrating with some of the new breeds of accounting software. Since we are now based in the UK, you may see that this article is restricted in its coverage of the US market, but then, I am afraid that was bound to happen at some point. Two of the most successful SaaS (Software as a Service) generation accounting applications in the UK market today are Kashlow and Xero.

The History

I have personally used both, although the pleasure of integrating other software applications with an accounting system has been restricted to Kashflow, and I must say, that it was quite an easy task to do so. Their API is pretty comprehensive and if they don’t have a particular function, they’ll create one really quickly if you need it, unless you’re asking for something too complex. Nonetheless, Kashflow’s customer service is pretty good, with management getting involved actively across discussion boards in the UK to help answer any questions or queries. The owner of Kashflow is one Duane Jackson, a poster child for the Prince’s Trust. Long story short, Duane went from being a not so ideal citizen to building a £10 million company in 5 years or so, with a little help from the Prince’s Trust and one of the UK’s prized lords.

Xero, on the other hand, is a software that originated in New Zealand and has now grown internationally across the UK. We now use Xero as our defacto accounting system, and that is for one of several reasons. The fact that Xero is not UK based doesn’t cause any damage to the actual application; they have an API, integrate with similar products and other applications just like Kashflow and the software complies equally well with UK law. But it is in Xero’s roots that it is the 2nd most successful accounting SaaS in the UK. Their management and sales teams are not as active on UK small business forums, whereas Kashflow, I imagine, picks up quite a bit of business from them. Nonetheless, Xero is a British Telecom recommended product (BT is pathetic, so their opinion only carries political weight, nothing that actually matters) and is also recommended in partnership with some of the bookkeeping franchises across the UK.

The Techie Stuff

I run a software development company in London and our primary area of expertise is SaaS.  It is quite clear (well, at least it is to me), that Xero has been developed by far more capable developers than Kashflow has. Kashflow is build on Microsoft asp, which I am quite against. It’s older technology, although it’s just as functional. Their use of URL cloaking, etc. is limited (which is not a technical drawback) and their interface is very CSS and HTML as opposed to AJAX driven. Now I’m personally against using Jquery and AJAX for functions that are simpler to use with simple HTML. For example, ajax tabs with a submit button on them are plain wreckless because the interface does not work according to generally understood internet behaviour. However, I think Kashflow lacks the use of AJAX even where it would be appropriare. In my personal opinion, I find it a much more soothing experience to use Xero than Kashflow. Xero generally runs faster too (it did for me) and I think it is, from an overall standpoint, a much more thought our application than, perhaps, Kashflow. However, this is probably my tech bias talking and has absolutely nothing to do with the use of the software if you’re an accountant as you’re most likely used to the scum of the earth (also known as Sage) - but I don’t practice accounting anymore (and I’m about a million times happier)!

The Interface

I’ve already covered this above (although the only thing I should’ve said in the techie stuff was AJAX, .Net and ASP). I like the general layout, colours, look and feel of Xero much better than that of Kashflow. They’re both free to try out, so knock yourself out and disagree with me all you want (and see if I care!).

The functionality

This, in my experience, is the same in both Xero and Kashflow. They both have simiar irritating flaws just like Quickbooks, Microsoft Accounting, Peachtree, MYOB and Sage do. There’s no IDEAL way to match off a receivable against a payble without doing credit notes (there really should be, it’s a damn simple journal entry). However, both applications are promising in the arena. A common contacts database which can both become customers and suppliers is a good start, so a secnario where you could simply write off a receivable from the same person against their payable with a single click is fast approaching! One of my favourties with web applications is the flexibility you have of customising your invoices, receipts, etc. within the application and sending them off to customers with PayPal integrated. Both Kashflow and Xero do this beautifully (although more customisation can never hurt), but it saves us from drafting pretty looking invoices on letterheads before sending them out. We can be greener, although British customers tend to ignore email invoices!

Pricing and Cost

Well, I honestly think Kasflow wins here: fair and square. They offer a FULL service demo for 2 months, and then they charge £179 (I think so) a year. That’s not bad, considering you don’t have to worry about upgrades, etc., and everything is always backed up.

Xero, on the other hand, gives you a FREE demo for upto 5 invoices (without a time limit). That’s enough to help you get a feel of the software, after which you have to pick from what i think is a restrictive, almost non workable £12 per month option. In most instances, you’ll have to go with the £19 a month option, which makes it about 30% or so more expensive than Kashflow, but it means you can split the payment out on a monthly basis.

I think Kashflow definitely wins on a pricing model.

Integration with 3rd party applications

Really, both companies have pretty robust APIs and they integrate with virtually all the same applications. I think Kashflow is more aggressive with finding businesses in the UK to integrate with, but if you need to integrate with a custom application, I would think they are both equally good.

So, why did we choose Xero?

OK, this is it. Really, almost all accounting software is the same and other than some of the cosmetic stuff and user interface, they all accomplish the same task. Here is why we chose Xero. I’m involved in one too many businesses, much to the point where this blog has become second priority lately and it has taken me over 3 weeks to complete this article (and it is still mighty hurried). So, as with all businessmen that have growing businesses, you delegate. That’s what I wanted to do with our accounting function, and as an accountant myself (in my past life), I struggled with handing over full control to a third party accountant or bookkeeper. I wanted somebody else to do all the gruntwork, but I still wanted to login and see that things were being done the way I wanted to so the GL reflects what it should for tax and funding purposes. I’m not suggesting that Kashflow can’t do this, but with Kashflow, if I hired a third party bookkeeper, I would have to share my password with him / her. Now I’ve already got 30 passwords (as I’m sure you do) and I like to conslidate them from time to time, so I didn’t want to remember another one for our accounting system. With Kashflow, I would have to. With Xero, I didn’t.

To cut the confusion: Xero allows for multiple users with varied permissions while Kashflow has JUST ONE username/password per company account, so if you’re the owner and hire an external bookkeeper or accountant, you all need to share the same login credentials. To me, that’s what sealed the deal with Xero. I can revoke someone’s access at the touch of a button or limit them to just seeing or using a certain part of the accounting system.

There’s a whole lot more to discuss, but really, I must get down to business. Thanks for tuning in, folks.

5 Responses to “The new breed of small business accounting software - Xero vs KashFlow”

1. Duane Jackson Says:
   March 8th, 2010 at 6:28 am

   Hi,

   Thanks for sharing your thoughts. It’s always very interesting to see an outsiders perspective on the UK SaaS accounting scene, especially a write up as detailed as this.

   A lot of the behind-the-scenes code in KashFlow has been re-written in C#, and we’re aiming to have Classic ASP ditched entirely within a year or so. This will also mean introducing the multi-user permissions functionality that’s currently missing. (There are currently work-arounds for this, including using FreshBooks or a third-party tool that uses our API, but neither are ideal)

   But you’re in good hands with Xero, it’s a very nice product.

   Thanks again,

   Duane Jackson
   Founder, KashFlow Software

2. Commie B Says:
   March 8th, 2010 at 10:35 am

   Hi Duane,

   I knew you would surface soon! It’s great to hear that you guys are moving to C#; it should provide great growth potential compared to Classic ASP.

   When you do go live on the new platform, I think it would be great to have the ability to extract Xero data and throw it into Kashflow for to-be customers like us.

3. Rod Drury Says:
   March 16th, 2010 at 10:13 pm

   Thanks for the thoughtful review and thanks for the gracious comments Duane.

   It’s still early days for all of us in the industry and its really good having two offerings so that we spur each other on. I’m sure we are both growing the market and feedback on what we can all do better is much appreciated.

   Cheers

   Rod

4. Chris Says:
   April 20th, 2010 at 11:15 am

   We love Xero. I tried out Kashflow as well but found it to have a few too many features and a cluttered, 90’s web style design. Our accountant however prefers Kashflow.

   It seems that Xero is great software, the only place it lacks is in the tax implementation for doing VAT returns etc, where it is impossible to lock things down and you have to be very careful if you put things through retrospectively. VAT returns have to be checked thoroughly for correctness. I can’t comment on Kashflow, but this is where most accounting software falls down anyway, so it might not be perfect either!

5. Angus Bradley Says:
   July 8th, 2010 at 12:54 pm

   We’ve been comparing these two as well, our accountant also prefers Kashflow (think there’s a UK bias here), but for me the showstopper is foreign bank account support, which Kashflow doesn’t have. With ££ so weak at the moment, we’d be crazy to hold our assets all in Sterling, so looks like we have to go with xero.

   Thanks for a great review.

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