Whether you're running your own business, working as a book-keeper or accountant for someone else, or the the IT guy making sure the business has access to the tools they need there's one software category you have to keep in your business' application kitbag. That's accounting software. But today's applications go far further than double-entry accounting, raising invoices and producing a monthly or quarterly report for the tax office. They integrate with warehouse and logistics applications, point of sale terminals and other systems making them the heart of your business' backoffice. Two of the biggest players on the market are the veteran MYOB and Xero.
There was a time when the default answer, whenever you asked any small to medium buisness what accounting software they used was MYOB. With decades of experience and the broad respect of the accounting community MYOB developed a strong reputation. However, it took MYOB a little while to hit its straps when it came to cloud. But, eventually, they updated their platform and have produced an application that makes it easy for business people to get things done without needing to take a course in advanced book-keeping.
Their online software, MYOB Essentials, makes it easy for business people to focus on their core business and not waste time navigating a system designed just for accountants. A good example of that is how the software avoids the use of technical terms such as debtors and creditors, and uses plain English terms such as “Money in” and “Money out".
As someone who runs a small business, I want to be able to carry out everyday tasks quickly with as few mouse clicks or screen taps as possible. If you want to create an invoice, you simply open the Sales menu and choose Create Invoice. You follow a similar process when it comes to processing payments or entering bills. One of the really useful features is the ability to save scanned documents into MYOB.
When you enter a bill, the "Link Document" button lets you upload a scanned document such as a paper bill from a supplier. That means when you look back at a transaction, all the data pertaining to that is held in one place., The feature could stand some expansion so it links to cloud storage services. I already scan and store documents and MYOB's process means I end up with two copies of each scan, one in MYOB and the one on my hard drive. That potentially adds the extra step of deleting one of the copies.
As you'd expect from modern accounting applications, there's a direct connection to bank accounts for downloading transactions and carrying out reconciliations easily. The number of bank feeds you can connect is dependent on your subscription level.
Generating reports is a very easy with a bunch of canned reports ready to go. For example, preparing your BAS is easy using the GST report. And with the tax office simplifying GST reporting in the new financial year, that process should get easier. Other reports such as Profit and Loss (there's a graphical version in beta testing), Balance Sheet and Trial Balance are easy to produce.
One of the things that is critical when choosing a cloud service, and often missed by buyers, is the ability to easily export data, either so you cna keep your own copy or for sending to an accountant. MYOB has a straightforward export function that makes that process easy.
The only real disappointment I had with MYOB was the MYOB on the Go app for sending invoices and receiving payments from your smartphone. Although it works with the MYOB PayDirect Reader so you can receive credit card payments, the application is looking a little dated.
As well as working with that payment system, MYOB Essentials can hook into other systems such as point of sale.
Although there is a free 30-day trial of MYOB Essentials, you'll need to enter a bunch of data in so you can get a feel for how it works. While many other systems provide you with trial data or a test company, I couldn't do this with MYOB Essentials. If you like the software, monthly subscriptions range from $27 to $55 depending on the number of bank feeds you need, monthly transaction volumes and payroll.
Although Xero is a newcomer compared to MYOB, it has managed to capture significant market share. As one of the earliest cloud-only business software companies, Xero was able to swoop in as incumbents like MYOB and Intuit struggled to adapt, not just to the cloud but also to a business user, rather than accountant-first, user experience.
When you first launch Xero, you're greeted with a dashboard that displays essential information such as bank account balances, how much money you're owned and what bills you have to pay. Right next to the list of outstanding invoices, there's a button on the screen so you can create a new invoice right from the home screen without the need to go through a menu. It's a small touch but reflects the needs of business operators. Money in and money out are front of mind for small and medium business owners so putting the most frequently used commands up front makes like a little easier.
One of the areas Xero has heavily invested in integrations with third parties so specific vertical industries can make the most from Xero. For example, there are add-ins for education, hospitality, manufacturing, and not for profits as well point of sale and payment systems. These can be accessed from the Settings and launching Add-ins.
Xero’s mobile app - I tried out the iOS version - is easy to use. Xero's developers wisely decided to focus on core functons that would be neeeded by a business perosn on the road rather than trying to fit every form and report onto a small display. So, everyday tasks like adding invoices and expenses are easy. The app uses Touch ID or a PIN for access.
There are plenty of reports ready to use for keeping track of essential business metrics and for completing your regular tax office obligations.
The one thing about Xero that I found perplexing was their pricing tiers. There are three main price points - $25, $50 and $60 per month. The two cheapest tiers are identical except the $25 per month deal only includes five invoices, five bills and 20 bank transactions from one bank per month. You also get payroll for one employee - which is fine for sole traders. In order to enter more invoices, bills or bank transactions you'll need to jump to the $50 per month tier.
Premium plans take that but add payroll for five users as a starting point at $60 per month. That goes up to $100 per month once you hit 100 employees. Extra emplyees cost $2 each per month.
Which would I buy?
It's a really tough call. I first looked at these products a few years ago and, back then the decision was very easy. Hands down, Xero was the better software if you were committed to cloud-based business software. But MYOB has made great improvements to their platform and responded to the market's need, developing into a very competent application.
In terms of usability, both are very user friendly. I probably give the edge to MYOB when it comes to the desktop application while Xero's mobile app is greatly superior in my view. And then there are the matters of which program will make it easier for you to work with your accountant and which third-party integrations are most valuable to you.
With both applications, the least expensive tier is unlikely to meet the needs of anyone running a business full time as both limit the number of bills and invoices to just five of each per month.
If I was laying out my one money, I'd go with Xero. Neither application's entry level offer enough transactions for my needs so Xero is a better value proposition.
This story has been updated since its original publication.