Over the years, tons of people have asked Scott and me why, as ecommerce accounting experts, we choose to use Xero (vs. QuickBooks Online (QBO)). The answer has been an utter no-brainer for the past several years. You can see some of the reasons by reading an article I posted years ago when we switched from offering accounting on any tool to only using Xero back in 2014.
But our choice of exclusively using Xero was a bit more complex than that article, and I think most knowledgeable ecommerce entrepreneurs and accountants have taken (or might take) the same journey we did.
During development of our soon-to-be launched Accounting for Amazon course, I had the opportunity to reflect back on our multi-year journey with clients selling on Amazon, and I wanted to share our experience.
So let’s go back to the beginning and what it was like working with Amazon accounting data and then see which accounting system is the best for Amazon sellers, Xero or QuickBooks Online, as we get closer to 2018.
2012 to 2014
Early 2012 - We started working with our first Amazon seller on January 1, 2012. We quickly learned that we could pull settlement statements from Amazon that would match against the amounts being deposited into the bank. But the problem was that the settlement statements often spanned multiple months and/or years (i.e., December 20th to January 7th), so we needed to find a way to report the underlying data in the proper periods. Otherwise, the financial reports we gave our clients would have massively wild monthly swings and make the monthly trend reports much less useful.
As we started digging in, we also realized that the settlement statements didn’t break out the sales tax collected. So we would’ve been reporting money that’s owed to the government as income to the business. Yeah, the government doesn’t really like that too much.
So we threw together an Access database to help us manage all the detailed data and try to match it up to the deposits. It sorta kinda worked, but Amazon kept adding all these random fees on a weekly basis, so we’d basically have to make changes to our database every time before we even got to the point where we’d add new data so we could run updated reports. Our “automated” process would still take us an hour every single day. Ugh.
Mid 2012 - We discovered Xero, and in pretty short order, we had the ability to import that detailed data directly into Xero.
I thought that was downright amazing.
That is, until two things happened:
- The thousands and thousands of Amazon orders I was importing started crushing Xero. The system that previously had worked flawlessly became slow and would frequently time out and/or become inoperable.
- I started asking myself how in the world I was going to match all those individual transactions to the lump two-week deposits landing in the bank account.
It became obvious to me that I was on the wrong path.
I had spent a full week importing all the transactions into Xero just to turn around and spend another full week undoing all that hard work. Lesson learned. We returned to our original plan of updating our custom database and recording the summarized transactions. Ugh.
2014 was our pivotal year. We had a couple years of digging into and learning about ecommerce accounting under our belt. And this was the year we found A2X. As soon as we saw it, we understood what a goldmine it was.
A2X took our ugly (and remember, “automated”) Amazon posting process from one hour to… I kid you not… two clicks. A2X splits the income, fees, sales tax collected, etc. into one or two summarized invoices (by period) with everything properly recorded, and they match to what’s deposited in the bank account. Every. Single. Time.
It truly was amazing.
But here’s the thing. A2X was founded by Kiwis in New Zealand (where Xero was born in 2006), and in case you hadn’t noticed, A2X stands for Amazon-to-Xero. That’s right, this tool only worked with Xero. Luckily, we already loved Xero, but this made Xero indispensable to our process. And when our clients started selling on Amazon.co.uk, Amazon.mx, and other international stores, the combination of A2X and Xero’s great multicurrency functionality allowed us to make that transition seamless as well.
So when people would ask us why we used Xero instead of QuickBooks Online, there were a myriad of reasons, and the choice was clear. In fact, it was so obvious, we could confidently say that Xero was the best choice for Amazon sellers. Full stop.
Now… three years after adopting A2X, we still have people asking us “Why Xero,” and I thought it would be useful to answer the question… is the answer still the same?
Here’s a quick timeline I threw together comparing the most critical features of Xero and QuickBooks Online for an Amazon Seller.
Let’s start at the top:
- Multicurrency Functionality
- Xero - multicurrency was built into the core functionality of the product from day one, and it is beautiful. I’ve never run into a problem with it. It does, however, come with a bigger price tag of $70/mo vs. the standard version at $30/mo.
- QuickBooks Online announced this functionality in August 2015. Although there were early complaints that the system didn’t have multicurrency bank feeds, this was added very soon after. I’ve asked around, and I haven’t heard any complaints about this functionality from QBO users. Multicurrency functionality is included in both Essentials ($35/mo) and Plus ($50/mo) versions of QBO.
- Amazon Summary Functionality
- Xero - A2X was born in 2014, and as I mentioned above, it’s frickin’ amazing. If I was Xero, I would’ve tried to buy A2X and kept the functionality for myself… but I’m not Xero.
- QuickBooks Online - A2X began integrating with QuickBooks Online earlier this year. Users will soon be rejoicing if they aren’t already.
- Price for Tracking Categories / Class Functionality
- Xero - Tracking categories are how ecommerce businesses can show their income and expenses by sales channel (i.e., Amazon.com, Amazon.co.uk, eBay). It’s a pretty critical feature for ecommerce businesses, and it’s available in every version of Xero. I would personally recommend starting with the Standard Version of Xero ($30/mo) for all ecommerce sellers and upgrade to Premium only if you need foreign currencies.
- QuickBooks Online - Classes are the equivalent of Xero’s tracking categories, but you have to have the QBO Plus version ($50/mo). Whoa. Unless I needed multi-currencies, I’d be using Xero just because of the massive difference in subscription fees between the standard version of Xero and the Plus version of QBO.
Let’s cut to the chase. QuickBooks Online has more or less caught up to Xero. The integration between A2X and QuickBooks Online isn't nearly as elegant as it is with Xero, but it does work. In the end, there’s really no competitive advantage for one over the other at this point… now it simply comes down to price and which one you like using better.
I (and my team) still greatly prefer using Xero and find it cleaner and easier to use, but if you’re an Amazon seller (or accountant) already familiar with QuickBooks Online, I’m not sure there’s a solid reason to switch to Xero anymore, or vice versa.
Having said all that, I do believe that Xero and QuickBooks Online, each when using A2X as an add-on, are far superior accounting solutions for Amazon sellers than any other alternatives out there. It’s because of all this that we decided to include both Xero and QuickBooks Online in all of our ecommerce accounting training courses, including Accounting for Amazon, due to release next week.
If you’re looking for more ecommerce accounting tips, please check out our free webinar, Essential Tools for Amazon Sellers.
 This isn’t a Xero thing… it’s a cloud accounting general ledger thing. They simply weren’t built for more than 1,000 daily transactions. Go figure.