FreshBooks vs Xero: The Best Low-Cost Accounting Program for 2020

By Dena LandonWriter
— Last Updated:

In the world of cloud-based accounting software, it can be hard to find the right service for your company. Not all platforms have the same capabilities and there are sometimes puzzling gaps in what would otherwise be a perfect solution.

FreshBooks and Xero, two of the main competitors in the space, have many of the same features, but each lacks important processes, which may lead you to look at other programs. We’ll be comparing FreshBooks vs. Xero in this article to help you decide which is best for your business.

If you want to know more about the individual programs, we recommend that you check out our FreshBooks review and Xero review. Both made our best accounting software selection, too. Read on to discover which might be better fit to meet your needs.

1. Invoicing

What you need on an invoice varies by business and customer, but some things are always the same. Invoices need fields to indicate who you’re billing, what you’re billing them for and when payment is due. FreshBooks and Xero have the basics, but if you’re looking for more advanced features, consult the chart below.

Send recurring invoices
Automatically add late fees
Send payment reminders
Integrate with inventory
Bill for hours worked
Customize invoices (not many options) (from a template)

Comparing their invoices side by side, you’ll notice key differences.

Xero’s invoice has two serious deficiencies. While there are boxes to add notes they don’t show when the invoice is printed or emailed. There also isn’t a place to add terms, such as 1 percent, net 30.

FreshBooks’s invoice form has places for notes and terms. If you need to collect a deposit before work begins, you can request a percentage or flat deposit amount. Project-based businesses will find that to be an invaluable feature.

While both services claim to give you customized invoices, that’s not quite true.

FreshBooks lets you pick between adding a logo and changing the color or font, but you only get two templates to choose from otherwise.

You have to upload a template to customize an invoice in Xero, but the fields on it must correspond to the service’s standard invoice fields. You can’t add anything that isn’t already present on a Xero invoice. Read our Zoho Books review for a more flexible program.

If you bill customers for the same charges at regular intervals, you’ll want to send automatic, recurring invoices.

In Xero, you can set invoices to repeat through the “sales” menu. If you’ve already sent an invoice, you have to navigate back to the “sales” screen to make it recurring, which is annoying.

Repeating Invoices

To save time, FreshBooks puts “make recurring” on the screen after you hit “save” on an invoice. It doesn’t need you to have already received a payment from the customer like QuickBooks Online does. Read our QuickBooks Online review to see why we think requiring such is a significant drawback of the program.

FreshBooks includes hourly billing with all its pricing plans, and if you’re billing for a project, it allows you to pull the project’s information into an invoice. Xero can’t yet bill for hours worked, but since it just rolled out projects, it’s likely it’ll be adding the feature soon. If you can’t wait, and you’re in the UK, check out our FreeAgent review for a service that does hourly billing well.

Not all businesses bill for time worked, though. Product-based businesses carry inventory on hand and will want an invoice that pulls in quantities.

Xero excels at inventory management. When setting up a new account, you can upload existing inventory spreadsheets, including SKUs and quantities on hand. Once an items is sold, pick from its inventory on the invoice’s drop-down menu. Quantities update automatically.

FreshBooks doesn’t include robust inventory management in its product suite. Instead, you have to pay for a separate app.

Once you’ve sent invoices, it’s important to stay on top of collecting on them. FreshBooks and Xero give you several ways to monitor your aged receivables balances.

“Outstanding revenue” appears at the top of FreshBooks’s main dashboard. The total amounts due are pictured in a bar that extends across the screen. Though the service also has an aged receivables report, it can’t be customized and you can’t sort or filter by customer.


After booking an invoice, FreshBooks asks if you want to send automatic payment reminders. This takes the burden of remembering to follow up off your shoulders. You can set the follow-up times and customize them by customer, too. If someone says they don’t want to be bothered until they’re 30 days past due, you can change their settings without affecting other customers.

Xero’s dashboard puts the amount you’re owed at the top right in a box called “invoices owed to you.” It also has an aged receivables report and a report with a detailed breakdown of past due invoices. It’s easy to keep an eye on what you’re owed and the service will send automatic payment reminders to customers.


FreshBooks adds late fees to past due invoices. To get the same feature in Xero, you’ll need a third-party app.

We prefer FreshBooks’s invoicing to Xero’s. It’s easier to setup time-saving functions, late payment reminders are individualized and it includes hourly billing.

Round: Invoicing
Point for FreshBooks
Visit FreshBooks1
Visit Xero0

2. Bills

Paying the bills that keep your business running is as important as bringing in revenue. If you don’t pay your electric fees, vendors, supplies or rent, your business will shut down. That said, bills aren’t a profit center, so you don’t want to waste a lot of time on them.

Setting up automatic payment on bills that recur monthly saves time and hassle. FreshBooks and Xero make it easy to do so.

In FreshBooks, the “make recurring” option appears on every bill you input.

Xero puts “repeating bill” in the “purchases” menu under “accounts.” You can also do it from the “bill options” drop-down on a bill.


Bills in Xero can be paid by check or, neither of which is as convenient as paying from a bank account or credit card in the software.

In FreshBooks, you can keep a credit card on file and pay bills using it.

Dashboards help you stay on top of your accounts payable, particularly those that can’t be automated.

The main “bills” screen in Xero presents the total of bills in draft form, awaiting approval or payment and overdue in boxes. Under that is a column graph that compares bills due with bills paid. It’s a nice, at-a-glance presentation of expenses outstanding.


FreshBooks gives you a snapshot of bills due in its “expense report” under “reports” and on the main “expenses” screen. That said, bills due aren’t as clearly presented on its main dashboard as they are in Xero. Neither blows us away, though, so we recommend that you check out our Sage Business Accounting review if expensing is a priority.

3. Reports

At some point, every business will have to review how it’s performing. Analyzing inventory will tell you what’s moving and what’s sitting on the shelves. Customer reports could reveal that it’s time to cut ties with a delinquent customer. Reports consolidate and condense the data of invoices, bills and other transactions to enable business owners to run their business better.

Xero has reports on sales and purchases, inventory and fixed assets, payroll and projects. It’s one of the few accounting platforms that includes an equity statement with the standard profit and loss, balance sheet and cashflow statements.


In contrast, FreshBooks appears to have put little time or effort into its reports. There are only nine standard reports, and the sole financial statement it presents is the profit and loss. While you do get two of the most important reports for keeping a small business afloat, accounts aging and expense reports, they can’t be customized.


A free, cloud-based accounting solution, Wave, does better on its reports, as you can read in our Wave review.

The lack of attention FreshBooks gives to reports is puzzling, given its otherwise robust options. Xero is the obvious choice in this category. FreshBooks lost the round for the same reason in our FreshBooks vs. Wave article.

4. Pricing

FreshBooks and Xero both offer three pricing plans that are meant to grow with your business. The idea is that you don’t have to pay for features that you don’t need. In reality, it’s almost impossible to run a business on the lower plans.

Xero’s lowest tier plan, Early, costs just $9 a month. It limits you to sending five invoices and quotes, entering five bills and reconciling 20 bank transactions. It’s hard to imagine that a business could continue at this level for long.

FreshBooks’s cheapest plan, Lite, costs $15 per month, but it gives you unlimited invoices and estimates, bill payments and credit card processing. Though it doesn’t limit transactions, it only allows you to add five clients. It may cost more that Early, but it’s still the better value.

Growing, Xero’s mid-tier plan, removes restrictions on the number of transactions you can process, but doesn’t add new features. Because it more than doubles in price, to $30, we prefer FreshBooks.

Its middle-of-the-road plan, Plus, costs $25 per month, and adds automatic payment reminders, accounting reports, proposals and the ability to tack late fees on to invoices and schedule recurring invoices to the options in the Lite plan. It also allows you to have up to 50 clients.

Xero’s most expensive plan, Established, jumps to $60 per month. It adds more functions, such as multi-currency, expenses and projects. By not including bill payment until the top pricing plan, the company essentially forces you to sign up for it right away or use a separate bill pay service.

In that case, you wouldn’t know your business’s net income without manually calculating it offline. We talk more about that handicap in our Xero vs Wave article.

The only changes between FreshBooks’s Plus and Premium levels are the price and number of clients. On Premium, you can service up to 500 clients. The monthly fee of $50 a month covers that, plus all the features available at cheaper price points.

Accepting payments online typically speeds up the collections process and cuts down on past due receivables.

FreshBooks integrates its payment processing, but you’ll have to pay transaction fees of 2.9 percent of the total amount plus 30 cents per transaction. Customers can click a link in an invoice to pay their bill.

Xero doesn’t offer integrated payment processing. Instead, you have to sign up for an app. While that gives you more choices as far as fees go, it’s less convenient for you and your customers.

What Xero does give you is payroll processing, but only at its highest pricing tier. FreshBooks doesn’t have built-in payroll processing.

When it comes to pricing, we prefer FreshBooks’s options. A small business could use the Plus plan for years without the risk of outgrowing it.

Round: Pricing
Point for FreshBooks
Visit FreshBooks2
Visit Xero2

5. User-Friendliness

Of all the accounting software we’ve tested, FreshBooks and Xero have two of the cleanest and easiest to follow interfaces. Nothing has an odd or confusing name and the menu options are clearly labeled and intuitive.

FreshBooks’s menu is on the screen’s left, while Xero’s menu bar runs along the screen’s top. Both have quick links to commonly used features scattered throughout, whether it’s a “new invoice” button on the main “invoices” screen in FreshBooks or a plus sign in the Xero dashboard’s “invoices owed to you” box.

We couldn’t choose between the two programs for user-friendliness until we looked at user support.

FreshBooks scatters hints and tips for new users throughout its platform, along with links to “help” articles relevant to the screen you’re on. It also offers email and phone support.


Xero has a help section, and step-by-step instructions with videos and tutorials, but there isn’t much help in the software, forcing you to exit and go to a different screen for help. There’s no phone support, either.

Because of its superior onboarding process, FreshBooks is our winner for user-friendliness.

Round: User-Friendliness
Point for FreshBooks
Visit FreshBooks3
Visit Xero2

6. Advanced Functions

From buildings to copiers, many businesses have fixed assets on their balance sheet, but it’s rare to find the ability to manage them in cloud-based accounting software.

If there are a lot of fixed assets on your balance sheet, you might want to look closer at Xero. Its built-in fixed assets module calculates depreciation and books the journal entries for disposals. When you’re starting out, you can upload your fixed assets from a spreadsheet.


FreshBooks doesn’t let you import a schedule of fixed assets, nor does it include a fixed assets module. You can sign up and pay for a separate app, but you can’t book a journal entry like you can with QuickBooks Online because FreshBooks isn’t a double-entry accounting system. You can read more about how the two compare in our FreshBooks vs. QuickBooks Online piece.

Xero also beats FreshBooks in inventory management. It includes inventory in every pricing plan, mainstains stock levels and runs reports. FreshBooks requires you to sign up and pay for a separate app if you want inventory management that syncs with your accounting.

The only advanced function where FreshBooks might have an edge is projects. You get a centralized place for your files and you’ll be able to control team member access. Projects can be broken down in detail, with assigned deliverables and due dates.


If it’s a project for which you’re billing time, FreshBooks has time tracking in its software and app. You can even assign different hourly rates for different employees.

Xero only recently rolled out projects, so it’s hard to tell how it compares. While you can track time, money and profitability with it, too, it doesn’t have a due dates function. You can’t invite people to contribute to it, either. It has less of a projects management feeland more of a cost accounting slant.

Xero has more advanced functions than FreshBooks. That said, if your business doesn’t need to track inventory or fixed assets, but does want to manage projects, we suggest going with FreshBooks.

Round: Advanced Functions
Point for Xero Accounting
Visit FreshBooks3
Visit Xero3

7. The Verdict

It’s difficult to choose between FreshBooks and Xero because where one is weak the other is strong. For example, FreshBooks is weak on inventory and Xero is strong, but FreshBooks beats Xero in its easy processes for booking invoices and expenses.

That said, we have to conclude that FreshBooks is generally a better choice than Xero. It’s simpler and more intuitive to perform basic functions, such as setting up a recurring bill. Its pricing makes more sense than Xero’s and it gives you more options for customer support.

The exception to our recommendation is if your business is inventory-based, has a lot of fixed assets and relies on reports. In that case, Xero is the obvious choice.

Which do you prefer, FreshBooks or Xero? Has this article helped you make up your mind between the two? Let us know in the comments below, and thanks for reading.