This comparison was written by Charles Klvana, Xero Partner of the Year for 2013. It is in response to a comparison of the same programs by Pam Pitt, MYOB Partner of the Year for 2013.
Xero had a huge head-start on MYOB in bringing accounting for small business to the cloud. With recent upgrades to MYOB’s core accounting product AccountRight Live, is MYOB finally starting to catch up in online accounting software?
I’ve been a bookkeeper for 15 years, using MYOB predominantly from version 9 all the way through to version 20. At Eye on Books, our team of seven bookkeepers take care of over 200 small businesses accounts and in the past three years over 80 percent of those clients have made the move to Xero.
This has significantly changed not only how our clients work, but how we as bookkeepers help our clients. Each product has their advantages, but for many newcomers it’s hard to determine whether MYOB AccountRight Live or Xero might suit their client best.
Let’s address the biggest difference between Xero and MYOB Accountright Live first; the way we interact with company files stored in the cloud.
Xero has a browser-based approach. This means users can access all functions of the software from any device with a web browser. No need to install any software, simply load the browser, login and all functionality for Xero is available (even on a phone there’s no app required).
I’ve found all recent browsers to be supported and the versatility and sheer convenience of this feature is one of Xero’s major selling points. This also means that there is only one version of Xero; all upgrades are done behind the scenes.
AccountRight Live requires the user to install the application onto the host computer to access the accounts file stored in the cloud. After installation the MYOB interface is the same that the majority of Australians have grown used to over the past 20 years, so there is very little learning curve.
Updates have been frequent in the past, and once a data file is upgraded all users must upgrade their client software to be able to access it. At times this can be a little cumbersome for bookkeepers, as some clients may not have upgraded. That means we still need to keep various versions installed or else talk our clients through upgrading their software over the phone.
Another big concern for clients and bookkeepers is backing up their data. After installing AccountRight Live it is possible to download your accounts data file from MYOB’s cloud and store a backup of all your data on your computer. Users and bookkeepers can then have multiple “snapshots” of their accounts.
Xero does not have a backup feature as such. After you cancel your subscription, Xero is obligated to retain your data for seven years. During that time a user can restore their account to its state at the time the subscription was cancelled.
While backups are a great security blanket the advent of cloud software begs the question – are backups still relevant?
Do you backup your Gmail? Do you backup your netbanking transactions or Facebook? Is there a need to have an offline “functional” backup of your financial accounts in this day and age?
Financial accounts are only debits/credit ledger lines at the end of the day, so will reports of our business financials suffice as “backups”?
Accessing data hosted remotely in the cloud will always have some impact on speed. Basic tasks such as entering purchases one at a time take a similar amount of time in Xero and AccountRight Live.
Some things in AccountRight Live still take a long time even with the most recent updates. Reporting can take quite a while (up to 45 seconds for a GST summary report, and even deleting a transaction can take as long as 10 seconds). Sometimes there is a delay in Xero but in reality it doesn’t take longer than waiting for any other webpage to load.
The way in which we deal with these delays are different between the two. Only one thing can be done at a time in AccountRight Live. The program “freezes” while waiting for a transaction to be deleted and the user must wait for the process to finish. Expert Xero users open multiple browser tabs, so while one tab is loading a report the user can create a sale or delete a transaction in the other tab simultaneously, minimising the impact of loading delays.
The biggest concern of any business owner is how to go about creating sales and getting paid and here there are some big differences between AccountRight Live and Xero.
Both programs allow a user to create a sale and apply a payment from the screen immediately following. But this is where the similarity ends.
AccountRight Live has a complete sales system incorporating quotes, sales orders and sales invoices. Xero has only a draft invoice, invoice awaiting approval and approved invoice stages. Xero users must find workarounds and add-on programs to provide the missing quoting functionality. Xero has announced that they are working on quotes, but no release date has been set.
The process of sending final invoices are another major difference. AccountRight Live will only send invoices from your own desktop mail program. You can’t email invoices if you use a cloud-based mail program instead (such as Gmail) or if you’re using a computer other than your own.
Xero emails invoices from within the browser-based program itself. You don’t need to have an email program installed and you can use any computing device, such as a phone or tablet or desktop computer in an internet cafe. A Xero user can also send the invoice from other email addresses. This is great for bookkeepers because we can send invoices from our client’s email address even though we’re logged into Xero under our practice login/email.
As well as sending a PDF invoice, Xero also sends a link to an “online invoice” which customers can view; they can also download statements and invoices from their own web portal in Xero. Our clients can see an audit trail that shows exactly when their customers viewed the invoice online.
Xero users can add a payment gateway such as PayPal or eWay to their online invoices so that customers can pay them on the spot with a credit card. The payment gateways not only collect the payment from customers but they automatically pay off the invoice within Xero. This saves bookkeepers a great amount of time in applying deposit payments and clients have a “live” view of their debtors.
Receipting invoice payments is quite different between AccountRight Live and Xero. In AccountRight Live a payment from a customer can be quickly applied against a lot of invoices at once, and automatically applied from the oldest to the newest which is very useful. MYOB also provides the ability to apply a discount automatically to customers who pay within certain terms.
In Xero the sale receipting process is done via the bank reconciliation screen. A user must a search for the customer and then manually tick off all invoices against which the payment has been applied.
However, from that same screen Xero will reconcile the bank statement line, while in MYOB it’s a two-step process – apply payment first then reconcile later, as long as the correct amount was applied. Often clients miss a few cents or otherwise make mistakes when applying payments against invoices, requiring the bookkeeper to fix them.
This area is much the same between both Xero and AccountRight Live. Both are able to produce a payment ABA file to upload to the bank including remittance advices emailed to suppliers (again AccountRight Live does this via your installed email program, while Xero doesn’t require a separately installed email program).
Repeating Sales and Purchases
Both Xero and AccountRight Live allow the user to create a recurring/repeating invoice/bill and give the ability to have this repeat automatically on a given time frame. The biggest difference however is that Xero is “always on”. Whether a user is logged into Xero or not, the repeating invoice/bill is performed on the due date automatically, and sales invoices are emailed out automatically without anyone logging in.
AccountRight Live will only trigger repeating transactions once someone has logged in. This can cause invoices to be weeks late if the MYOB file is only opened once a month.
A handy trick for power users: Xero will allow a user to backdate the start date of a repeating invoice/bill and Xero will create the repeating bill to the present day straight away. For example, if a Xero user created a fortnightly bill with a start date of a year ago, Xero will create 26 bills with one click of a button.
There are a number of differences with payroll as well. Xero’s subscription levels are based around the number of current staff per month.
Both AccountRight Live and Xero provide a timesheet function. AccountRight Live provides the very useful additional functionality of those timesheets leading to time-billing on the invoicing side, thus saving double entry of payroll timesheets, and invoicing separately.
AccountRight Live allows users to run a payroll for any staff member along any frequency at any time. Not only does this make it easy to run a quick payroll for an individual staff member, it allows the double entry of payroll for any period – which is clearly undesirable. For example, it is possible to run a fortnightly payroll for the same fortnight multiple times. This has often resulted in client’s staff being taxed on a fortnightly tax table when in fact it should have been weekly, etc.
Xero has a payroll “calendar” philosophy. It knows which fortnight/week/month pay period was done last and knows when the next period will run. It still gives the client the ability to run an “unscheduled” pay run outside of the normal pay run calendar.
Xero will also tax an employee accordingly during an unscheduled pay run if they’ve already been paid during that pay period. That is, Xero will apply the correct tax table and not simply allow the normal tax free threshold during that particular pay period. This is certainly a boon for employers.
Both programs give the ability to set up a payroll template when setting up a staff member, and can handle any combination of salary sacrifice, expense reimbursements, deductions, etc.
Xero has several extra features. Xero can lodge the TFN declaration to the ATO from within the program, negating the need to post off those red carbon forms to the tax office. Staff can access their own, private employee portal. There they can download previous years’ payment summaries, pay slips and lodge leave requests without having to contact the bookkeeper or employer directly. As a bookkeeper I can tell you this is a great time saver!
Xero payroll’s biggest downfall is the separation of the payroll register and the general ledger. Xero requires a separate posting after each payroll to create the necessary journal for the payroll. Not only does it not do it automatically, but it’s possible to do this more than once for the same payroll!
Our bookkeepers find many times that clients have either forgotten to post this “draft bill” containing the journal or instead have done it multiple times for the same payroll. AccountRight Live posts journals automatically after each payroll and is seamless. Xero has announced they are working on this basic functionality but no timeframe has been given.
Inventory and Jobs
The short answer to this section is that Xero does not do any kind of “stock on hand” inventory nor provide job income/expense tracking (where the definition of a job is that it has a limited life with a finite start and end). For the same price, AccountRight Live provides this all in the one software package with a fairly advanced inventory function that allows for price breaks, auto-build and even part unit selling.
This functionality can be provided with Xero through the use of add-on programs which increases the price and requires separate logins. Xero has said it is working on providing a stock-on-hand inventory but no word yet on how advanced this may be nor when it will be released.
Bank Reconciliation and Bank Feeds
Xero was the first to offer automatic and integrated bank feeds and to this day Xero’s bank reconciliation screen is a major differentiating feature. Through the innovative use of conflict resolution psychology, clients find themselves reconciling transactions with ease and dare I say eagerness with Xero.
It is most certainly a mind shift in the way bank reconciliations are done compared to the way we’ve been doing it in MYOB for the past 20 years. Instead of entering an end date with an ending balance, Xero instead provides a daily bank reconciliation.
MYOB, through its acquisition of Banklink, now provides something similar. However, it is nowhere near as feature rich and streamlined.
Power tools in Xero such as bank rules and cash coding where appropriate allow a bookkeeper to literally save as much as 80 percent in time when reconciling client accounts compared to the same set of accounts in AccountRight Live. Bank rules allow not only quick coding but also set rules that control and minimise common mistakes made by clients, saving us bookkeepers time spent fixing errors.
For the average business with 10-20 staff, Xero and MYOB are practically the same price ($70/month and $65/month respectively) but the differences come as always to the features any individual business requires the most. Certainly differentiating features would be inventory, jobs, multi-user access, payment gateways and non-desktop use.
Without question MYOB has a richer feature set out of the box. But Xero allows better interaction between clients, bookkeepers, accountants, staff and even customers. Xero also provides features that will automate the business better, streamline processes and save a lot of time in the long run for everyone.
Online Accounting software is usually not the only software a small business uses. Xero has a very large ecosystem of add-on programs including Point-of-Sale apps which automatically export the daily Z-read from the cash register to the accounts. There are also CRMs that leverage the database of clients within their accounting system.
MYOB has a growing list of add-on programs and has recently made some announcements about mobile apps that allow clients limited access to their cloud accounts from mobile devices. MYOB is definitely still playing a catch-up game with Xero when it comes to the cloud features (eg. online invoice, employee portal, bank reconciliation) of their accounting system.
There is not necessarily an absolute winner in the cloud accounting space and, as with any purchase, clients must weigh up what suits them best. In my experience their trusted bookkeeper or accountant can give them the best objective advice as to which that may be.
It’s not always a program’s features but often how business owners work or their personal preferences that play a deciding factor in choosing the right program for their business.
Charles Klvana is director of Eye On Books, a bookkeeping company based in Perth, Western Australia and Xero bookkeeping partner of the year.
Image credit: Hamilton Hawks Wrestling