Xero – BDO Drive

Which accounting software is right for you?

The world of accounting software has radically changed with the modern cloud solutions helping businesses benefit from real-time data feeds, simple integrations, up to date business reporting and other significant benefits. Each business is different and has complexities and challenges and so finding the right solution, not only for today but also for the business as it scales and changes, is essential and choosing the wrong solution could be a costly mistake.

This diagnostic aims to ask questions based on our experience to help identify if Xero is the right solution for you, or if you will need alternative integrations and apps or if you might need a more complex system.

Our team at BDO has significant expertise in advising businesses on the right solution for them, offering independent advice and identifying options to meet the business requirements.

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Q1
Do you need to report business performance by more than just region, product and cost centres?*
- Yes
- No
- Not Sure
Xero has a limit of two optional tracking categories which can be used to present additional information when reporting business performance. If more than two categories or business dimensions are required, an alternative solution may be more suitable.
Xero has a limit of two optional tracking categories which can be used to present additional information when reporting business performance. If no more than two categories are required, Xero may be a suitable solution.
Xero has a limit of two optional tracking categories which can be used to present additional information when reporting business performance. You should assess your business reporting requirements to determine whether Xero will provide all the required fields.

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Q2
Do you have more than 5000 transactions going through your accounting system each month?*
- Yes
- No
- Not Sure
Processing and reporting on this volume of transactions may cause Xero to slow and become much less user friendly. An add-on application may be able to batch the number of transactions being processed through Xero to ease this, and also offer better reporting on high volumes of transactions. If this is not possible, a larger, mid-market finance system may be required to handle these volumes.
Xero has limits on how many transactions can be processed and reported on before slowing and affecting usability. This limit should be considered when setting up, although add-on applications can batch entries and reduce the strain of high transaction volumes on Xero
Xero has limits on how many transactions can be processed and reported on before slowing and affecting usability. This limit should be considered when selecting the accounting platform to establish if it is suitable for the current level of activity and any future growth anticipated. Add-on applications for Xero can enable batch processing for higher volumes, or a mid-market finance system may be more suitable.

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Q3
Do you have e-commerce or significant online sales?*
- Yes
- No
- Not Sure
Xero has the ability to support e-commerce and online sales businesses through direct integration with add-on applications. These applications can be used to develop the sales functionality and reduce the effect of high transaction volumes flowing into Xero. As the business grows and volumes of transactions increase a mid-market finance system may be more sustainable for the recording and reconciliation of sales, VAT and receipts.
Xero can support a wide variety of businesses through it's core functionality as well as through a vast suite of add-on applications.
Xero can support a wide variety of businesses through it's core functionality as well as through a vast suite of add-on applications.

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Q4
Do you have work credit cards or prepaid cards?*
- Yes
- No
- Not Sure
There are currently limits to the way Xero can process credit card and prepaid card transactions as a stand-alone software, but by integrating a specialised expense application these can be processed efficiently into Xero.
Xero has an in-built module available to assist with processing out-of-pocket staff expenses or managing petty cash.
Xero has an in-built module available to assist with processing out-of-pocket staff expenses or managing petty cash. If your company's requirements are greater than this then an add-on application may be required.

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Q5
Do you have high volumes of purchase invoices and data entry in your current system?*
- Yes
- No
- Not Sure
Xero integrates with a variety of purchase invoice processing and data entry tools which will aid efficiency in this area of business processing through automation. If your business deals with high volumes then this could provide a big time saving.
Xero integrates with a variety of purchase invoice processing and data entry tools, to aid efficiency in this area of business processing through automation. Even if you have low volumes of these transactions, these tools could save you time in your day-to-day processing
Xero integrates with a variety of purchase invoice processing and data entry tools, to aid efficiency in this area of business processing through automation.

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Q6
Do you need to specify different approval levels for different costs?*
- Yes
- No
- Not Sure
There are add-on applications which integrate with Xero and allow for flexible approval workflows to be created, allowing for costs to be approved based on a variety of set parameters and through a clear hierarchy if needed.
Xero has built in functionality for simple approval stages to be set up, mainly through internal processes but without the ability to specify the approver.
Xero has built in functionality for simple approval stages to be set up, mainly through internal processes. If a greater level of control was needed, then add-on applications could be put in place to provide that control.

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Q7
Do you need a full purchase order process, including the ability to part match orders or have multiple approval processes?*
- Yes
- No
- Not Sure
It is possible to create purchase orders in Xero, but there is no way to match with a corresponding invoice which can result in the PO process being quite manual. There are add-on applications which allow for POs to flow through a detailed approval process and be matched to invoices for a more controlled process.
It is possible to create purchase orders in Xero, but there is no way to match with a corresponding invoice which can result in the PO process being quite manual. A simple approval process can be created through user access and internal process.
It is possible to create purchase orders in Xero, but there is no way to match with a corresponding invoice which can result in the PO process being quite manual. There are add-on applications which allow for POs to flow through a detailed approval process and be matched to invoices for a more controlled process.

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Q8
Do you have varied expense policies for different costs or employees, or have multiple approval levels?*
- Yes
- No
- Not Sure
The basic functionality in Xero for expenses supports many businesses, but there are limits. By integrating a specialised expense application these can be processed efficiently into Xero. These applications allow for more customised approvals for greater levels of control.
Xero has an in-built module available to assist with processing out-of-pocket staff expenses or managing petty cash. If your internal policies are straight forward and do not have complex approval requirements then Xero Expenses may be the appropriate solution.
Xero has an in-built module available to assist with processing out-of-pocket staff expenses or managing petty cash. If your company's requirements are greater than this then an add-on application may be required.

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Q9
Do you need to have bespoke user access rights (eg. restrict access to specific accounts)?*
- Yes
- No
- Not Sure
Xero has a selection of user roles that can be assigned to limit access, however they are system defaults and not customisable. For truly flexible user access and segregation of duties, a mid-market system may prove a more appropriate solution.
Xero offers a selection of user roles that can help to reduce access to certain areas or functions in the system.
Xero offers a selection of user roles that can help to reduce access to certain areas or functions in the system. If segregation of duties and greater controls were required for user roles and access a mid-market system may be appropriate.

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Q10
Do you have stock or work in progress in your business?*
- Yes
- No
- Not Sure
Maintaining stock and tracking levels of availability is possible using Xero's inventory management, however if requirements are more complex (eg. components, warehousing, bill of materials etc.) an add-on application will be required to allow for the necessary processes to be completed.
There are inventory capabilities within Xero, allow you to track inventory levels. For more detailed inventory functionality there are a variety of add-on applications which will integrate directly with Xero.
Maintaining stock and tracking levels of availability is possible using Xero's inventory management, however if requirements are more complex (eg. components, warehousing, bill of materials etc.) an add-on application will be required to allow for the necessary processes to be completed.

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Q11
Do you have significant fixed assets or operating leases?*
- Yes
- No
- Not Sure
Xero has a fixed asset register which can be used to maintain a smaller fixed asset list and allows for simple depreciation journals to be more automated. For a more detailed asset/lease register, add-on applications would be needed to integrate with Xero.
Xero has a fixed asset register which can be used to maintain a smaller fixed asset list and allows for simple depreciation journals to be more automated. For a more detailed asset/lease register, add-on applications would be needed to integrate with Xero.
Xero has a fixed asset register which can be used to maintain a smaller fixed asset list and allows for simple depreciation journals to be more automated. For a more detailed asset/lease register, add-on applications would be needed to integrate with Xero.

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Q12
Do you have foreign currency transactions other than on sales and purchases (eg. Intercompany or loans) ?*
- Yes
- No
- Not Sure
Maintaining foreign currency balances is possible within Xero for accounts payable, accounts receiveable and bank accounts. However if foreign currency transactions are recorded by journals to nominal accounts, a mid-market solution with more developed multi-currency capabilities could be a more appropriate solution.
Xero allows for multi-currency balances to be managed on accounts payable, accounts receivable and bank accounts. Multi-currency balances are converted into the functional currency and the gains and losses reported.
Xero allows for multi-currency balances to be held on accounts payable, accounts receivable and bank accounts. If there are other accounts in your business that require transactions posted in a foreign currency, then a mid-market finance system may be a more appropriate solution.

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Q13
Do you operate in many countries and need a single accounting system?*
- Yes
- No
- Not Sure
Xero global licences can be set up in any currency and jurisdiction, however there are functions which are not tailored (sales taxes for example). If localisation and presentation of the accounting platform in other languages is required then a mid-market solution may be more suitable.
Xero licences can be set up in any currency and jurisdictions, however there are functions which are not tailored to all jurisdiction (sales taxes) for example), and the consolidation of these different jurisdictions can be difficult in Xero.
Xero licences can be set up in any currency and jurisdiction, however there are functions which are not tailored to all jurisdiction (sales taxes for example). If the operations performance needed to be combined for reporting then a mid-market solution may provide a more streamlined process.

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Q14
Do you have wider business operating systems which require integration into your accounting system?*
- Yes
- No
- Not Sure
Xero offers an open API connection which can allow for bespoke systems to be integrated if the connection is developed. There are 3rd party app integrators that may be able to develop this connection for you if you required.
Xero offers an open API connection which can allow for bespoke systems to be integrated if the connection is developed. 3rd party app integrators offer developer services in these situations to enable the connection.
Xero offers an open API connection which can allow for bespoke systems to be integrated if the connection is developed. There are 3rd party app integrators that may be able to develop this connection for you if you required.

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Q15
Do you need interactive dashboard reporting for some or all of your team?*
- Yes
- No
- Not Sure
Xero offers a dashboard view which gives high-level financials and shows this view to users with the appropriate access to the system. If a custom view was needed for different users, alternative visualisations or real time sensitivity analysis, various integrations deliver flexible real-time reporting with variable access rights. Alternatively a mid-market solution may offer this flexibility.
Xero offers a dashboard view which gives high level financials and shows this view to everyone with the appropriate access to the system. There are certain ways that the dashboard can be customised but it cannot be tailored to individual users.
Xero offers a dashboard view which gives high level financials and shows this view to everyone with the appropriate access to the system. If a custom view was needed for different users, a mid-market solution may be better equipped to offer this flexibility.

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Q16
Do you create bespoke or complex reports to monitor performance?*
- Yes
- No
- Not sure
Xero offers a range of standard reports that can be tailored but there are limits to the ways data can be presented. Add-on reporting applications could provide assistance with preparing packs of reports, as well as more flexible and visual presentation options.
Xero offers a range of standard reports that can be adjusted and tailored. Add-on reporting applications could provide assistance with preparing management accounts, with more visual presentation options.
Xero offers a range of standard reports that can be adjusted and tailored. Add-on reporting applications could provide assistance with preparing management accounts, with more visual presentation options.

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Q17
Do you need advanced credit control, such as blocking accounts, tracking credit limits or automating responses?*
- Yes
- No
- Not Sure
Xero has limited credit control functionality which relies on manual report review and basic reminder functionality, however there are add-on applications which allow for automation of payment chasing, stop notices, cash flow monitoring etc..
Xero has credit control functionality which stems mostly from manual report review, and some simple automated chasing functionality. There are add-on applications which allow for full automation of payment chasing, stop notices, cash flow monitoring etc.
Xero has limited credit control functionality which relies on manual report review, however there are add-on applications which allow for automation of payment chasing, stop notices, cash flow monitoring etc..

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Q18
Do you have complex journals at month end, such as for revenue deferral or cost accounting with suitable approval stages?*
- Yes
- No
- Not Sure
The journal function in Xero is fairly simple, allowing for journals to be posted to the majority of accounts (all except control and bank accounts) in the functional currency. If you require multi-currency journals and improved management and control of prepayments and accruals then a mid-market solution would be more likely to offer the functionality you require.
The journal function in Xero is fairly simple, allowing for journals to be posted to the majority of accounts (all except control and bank accounts) in the functional currency. More complex journals such as automatic calculation of revenue deferrals requires either complex work arounds or can be achieved through additional apps.
The journal function in Xero is fairly simple, allowing for journals to be posted to the majority of accounts (all except control and bank accounts) in the functional currency. If you require multi-currency journals, journals using formulae etc. then a mid-market solution would be more likely to offer the functionality you require.

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Q19
Do you have more than 5 apps integrated in with Xero?*
- Yes
- No
- Not Sure
If you are already using 5 or more integrated apps with Xero it is likely you are reaching the limits of functionality with the system and may be able to find a price effective mid-market solution which can bring several or all of these aspects into one system.
Xero has a wide variety of integrated applications which provide functionality to help bolster the capabilities available from Xero's core product. By utilising these apps it is possible to create more efficient business processes.
Xero has a wide variety of integrated applications which provide functionality to help bolster the capabilities available from Xero's core product. By utilising these apps it is possible to create more efficient business processes.

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Q20
Do you have complex staff requirements such as significant numbers, expat workers or time management?*
- Yes
- No
- Not Sure
There is an optional add-on for payroll in Xero, however the functionality is limited for handling complex staff requirements and numbers over around 30 staff. There are payroll applications which integrate with Xero, allowing for more HR related functionality, time management, complex calculations and higher volumes or with open API you could build a data link to other HR systems designed for your industry.
Xero offers a payroll module which is more appropriate for low staff numbers with little to no complexities in the transactions. Once these limits are reached there are plenty of add-on applications that can deal with more complex requirements.
Xero offers a payroll module which is more appropriate for low staff numbers with little to no complexities in the transactions. Once these limits are reached there are add-on applications that can deal with more complex requirements.

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Q21
Do you need to be able to replicate intercompany transactions automatically across your group?*
- Yes
- No
- Not Sure
As group companies are held on separate licences in Xero, there is no way to automatically post intercompany transactions. Eliminations can be processed through an add-on application, however this would not be automatic. This functionality becomes available when looking at mid-market finance systems.
If intercompany transactions are required, an add-on application could be used to connect separate Xero accounts to allow for eliminations to be posted. If automatic posting across a group was required then a mid-market solution would be a more likely fit.
If you operate as a single company then intercompany transactions will not be relevant, but if you have plans to grow operations that required additional companies (eg. an overseas base for operations) then this could become an important point for reporting in future.

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Q22
Do you need to create consolidated financial reports automatically?*
- Yes
- No
- Not Sure
There is no consolidation feature within Xero, but a reporting add-on application can allow for multiple Xero accounts to be consolidated. Alternatively a mid market solution could provide this as part of the core accounting system and also ensure consistency across the group.
If consolidated financial reports were something that became relevant for your company, an add-on application could be used to connect separate Xero accounts to allow for consolidated reports to be prepared.
If you operate as a single company then consolidation will not be required, but if you have plans to grow operations that required additional companies (eg. an overseas base for operations) then this could become an important point for reporting.

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BDO has experience in helping businesses identify and implement the right accounting solution for them. Our wider teams can also assist with managing the day to day accounting needs of your business.

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Will Xero scale with my business?

Step 1 of 24 - Business Plan

Which accounting software is right for you?

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