Xero Review: Is Cloud Accounting Worth It?

I’ve used Quickbooks Desktop. I’m sure you’ve probably used Quickbooks. I hated Quickbooks.

There was nothing less exciting to me than doing a bank reconciliation – importing my bank account information to my desktop software, importing my credit card statement, trying to make sense of it all and remember where things came from and how to classify certain things. I felt like I could never get a true current snapshot of the business. Sharing income statements with partners who weren’t in the same room as me was never easy. I’d have to export the backup files, email them, and then talk on the phone with them or do a screen-sharing session.

In short, this left me thinking all accounting software was terrible.

Last year, on the recommendation of Micky at Kahuna Accounting – a company that provides remote accounting services – I checked out Xero. It’s the software they use with their clients. I figured that if they were using Xero, it was probably good.

Here’s my review of Xero.

Cloud Accounting vs. Desktop Accounting Software

First, the big thing that separates Xero from traditional accounting software is that it is completely cloud-based. You go to xero.com to log in. Now, you have access to your business’s books. Whether you’re on your office computer, home laptop, iPad, or phone, you can access your account.

Unlike desktop accounting software, where you need to be on a specific machine that has access to your company file, cloud-based software can be accessed anywhere by anyone who has a user account. With cloud software, giving remote access to your CPA is easy. No need to meet in person. Sharing access with a business partner is easy.

When I was on vacation a few months ago, it was easy for me to keep up with our finances while out of the office.

After using cloud accounting, I’m never going back to desktop software. But, that may not be enough to convince you. Here are the pros and cons of cloud software that I see:


  • Accessible anywhere from any device
  • You always have the most recent version of the software (no need to update every year)
  • Can share data easily with CPAs and other people who need access
  • You won’t lose your data when your hard drive gets fried, a virus, or hacked.


  • Data is not located “on-site”
  • Unsure about the real security of data if it’s in the cloud…

I personally don’t need my data located on-site. I don’t think anyone does. For the people who do, I think it’s a personal preference. But, I think that preference hinders your effectiveness. As for security of data – what’s more secure – a system with advanced encryption or your computer that your nephew set up and is constantly exposed to viruses or, if the hard drive crashes, all your data is lost? For me it’s a no-brainer.

One last word on cloud accounting – cloud accounting can get you paid faster. On average, it takes 41 days for a business in the U.S. to get paid. But, using online invoicing / cloud accounting can get you paid nearly two weeks faster, according to a study.

Xero Features

Now let’s check out what Xero has to offer.


Logging in, the dashboard gives a nice overall picture of our finances. It shows the account balances from our bank accounts and credit cards. It shows our cash flow. It’s also highly customizable so I can keep track of any metrics I’d like to track.

From here, I can go look at our income statement, balance sheet, invoices, inventory, and bank statements. It’s got most all of the standard features you’d come to expect from accounting software. But then we’ve got some unique things…

Automatic Bank Feed Updates and Reconciliations

The bank reconciliation is the single most time-consuming bookkeeping task. First you have to import the bank statement. Then you have to go line by line on your revenue and expenses. It’s never fun. But, Xero allows you to automate much of the process. When you sign up with Xero you can sync your bank and credit card accounts so that the feeds are always current. Every day Xero will automatically update with the latest entries. Each week or each month you can then match entries fairly easily.

If you want, you can also create “rules” for certain items to automate the reconciliation process and spend less time doing it manually. For example, if you know that each month you get a bill from your phone company. You can tell Xero – if there is an item on my credit card from Verizon, add an entry for telephone and reconcile it. Makes life much easier especially if you’re repeating the same thing time and again.

Related: Accounting and Tax Tips for Lawyers


Invoicing is a nice feature. It’s pretty comparable to other online invoicing software, except that it’s inside your accounting software. You can send bills to clients, keep track of what you’re owed, and allow them to pay online if you’d like. If your business has physical inventory, you can also keep track of it in invoicing to make sure you still have your products in stock.

Mobile App

Andrew Cabasso
About the Author: Andrew Cabasso
Andrew Cabasso is an attorney and co-founder of JurisPage, an online marketing agency for law firms, now part of Uptime Legal. Andrew has given many lectures and CLEs on website design and Internet marketing to legal professionals. He is the author of Search Engine Optimization for Lawyers and The Complete Guide to Attorney PPC. Follow Andrew on LinkedIn, Google+, or Twitter.

5 comments on “Xero Review: Is Cloud Accounting Worth It?”

  • I enjoyed learning basics of Xero. However, since your blog caters to law firms, it would be great to also review Xero (and other products) for its legal specific accounting capabilities.

    For example, how is trust accounting handled, how are invoice payments handled in terms of allocation to liabilities, income, discounts etc. How is cost accounting handled for contingent expenses vs reimbursable expenses.

    Another point to note is I believe in many jurisdiction, specially for Trust Accounts, Automatic Bank Reconciliation is not allowed as lawyers are required to manually clear each check and deposits in their books. It would be great for someone to publish a “Legal Accounting Guide” as it would become a wonderful resource. I would love to contribute if needed.

    • I am a CPA using Xero for law practice clients and to directly address Rick’s comments, I have found that a more robust solution is the addition of Clio for strong trust accounting capabilities. I customize the Xero dashboard to show at a glance that the trust bank account is reconciled to the corresponding liability account in Xero. Clio trust reporting shows the movement of funds at the matter level.

      Xero is flexible enough to be able to track the expense types noted in Rick’s comments either through the chart of accounts or by implementing tracking; however like any software it’s only as accurate as the users.

      The Xero “reconciliation” is really a matching process that should lead to a total in the system that matches up to the bank statement. While Xero does a very good job of automatically matching up transactions and classifying them according to rules, there is no substitute for a human comparing the the bank balance in Xero to the balance on the bank statement. Detailed reconciliation reports are available to prove out the balances since in certain circumstances books to bank statements can be different.

      • For small law firms, there are two implementation options: Use two products, one for “practice management/billing” and one for accounting. OR use a system that includes practice management, billing and accounting. Examples of all-on one systems are: PCLaw in desktop world, and CosmoLex in cloud world (disclaimer : I am the CEO of CosmoLex).

        Choice depends on individual needs as legal accounting requirements are very unique and much different from other service businesses. Happy to get into pros and cons of both options.

  • Cloud based” means that you do not have these applications installed on your computer, you use applications on some server online. This has advantages and disadvantages. The advantage is that you do not have to install anything and also you can work not just on your computer, but on any computer with internet connection. The disadvantage is that you must have an internet connection to use Cloud based programs.

Leave a Reply