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Rapid Growth of SaaS Accounting Software Xero and QuickbookOnline

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– High growth potential for SaaS Accounting software of 4.9% CAGR to $4.04 billion in  2019

– Xero & QuickbookOnline are the 2 established players in the field with growing subscribers.

– Main features, pricing and drawback are introduced and explained. Growing acceptance with accounting firms that are built around them in Singapore.


SaaS Accounting Potential

According to recent research by technology consulting firm IDC, the market for payroll accounting would grow at 4.9% CAGR to reach $4.04 billion by 2019. This is driven by demand for Software as a Service (SaaS) market of 16.4% CAGR growth as compared to 0.4% CAGR growth for the on-premise market. The on-premise market is essentially bleeding out to the SaaS cloud computing market.

The majority of the SaaS demand came from small and medium businesses as they are attracted to the low entry fee of cloud computing. Cloud computing allows the vendors to bundle the cost of hardware and software and scale it to out to businesses online. Large businesses have the scale to support on premise software which requires large upfront investments and for the time being, they have chosen to support their existing system instead of taking the risk of business disruption.

This rapid growth highlights the game changing impact of SaaS accounting. Payroll is a function of accounting which essentially moves funds between bank accounts periodically. The current industry practice of leading SaaS accounting software vendors would be to combine payroll services with inventory, budgeting, invoicing, time tracking and reporting functions. They provide tiered pricing which allows you to choose the bundle of accounting services required.

Leading SaaS Vendors

The SaaS accounting industry is a competitive and packed industry as it has low barriers to entry. Softwareadvice has a long list of 59 software for you to consider. For this article, we will just focus on 2 leading vendors. Xero and QuickbookOnline.

Source: Scoop

Xero started in 2006 and was listed on the New Zealand stock market in June 2007. As we can see, Xero had experienced high growth rate since its listing.

QuickbookOnline is developed by Intuit and it has both the desktop and cloud version. As we can see on the chart below, its online version (QBO) had also seen steady growth.

Source: Market Realist

As you see, both companies are riding on the rapid growth of SaaS accounting services. We would be looking at some of the features of their products which attracted scores of companies to them like bees to honey.

Feature – Chart of Account

Both are developed for small business users and they got their basics right. The basics of any accounting system would be the double entry system and all the major accounting functions from payroll, accounts payable, accounts receivable and inventory management are covered. These are presented in a Chart of Account as shown below.

Source: Streamtime (Xero Chart of Accounts)

Source: SageWeddingPros (QuickbookOnline Chart of Accounts)

Both QuickbookOnline and Xero understand that users of the system may not be trained accountants. This is why they have special access for accountants to look through the accounts to ensure that they conform with traditional accounting standards. It should be noted that both software provides full audit trail automatically.

Feature – Reconciliation

The next worth feature would be reconciliation of accounts. As mentioned earlier, reconciliation can be a very time consuming activity but absolutely vital for proper accounting. Both companies allow for full integration with your bank account, PayPal and credit cards.

Source: Jetbookeeping for Xero

As you can see, if the accounts match, you would just have to click ‘ok’. If not you can create a new record or transfer the funds away. If you are unsure, you can even leave a comment behind for your accountant. For regular payments, you can also create a rule to reconcile automatically.

Source: QuickbookOnline

For QuickbookOnline, they allow you to reconcile by each account (checking account in the example above) and when the difference is $0, then it is considered fully reconciled. You can then just click Finish Now.

Feature – Invoicing & Billing

Invoicing is a repetitive feature that can be streamlined especially for repeat customers. The same details do not need to be repeated twice and this applies for when you receive a bill from your suppliers. For bills, they might require different levels of approvals and this can be done.

Source: Xero

For Xero, if the customer is not a Xero client, they will get a free account that allows them to view all the bill that you have sent to them. If they are a Xero client, they save it in their own account and pay from their account. Alternatively, they can choose to batch pay.

Source: QuickbookOnline

For both, you can actually see the unpaid amount for your clients and the invoice can be automatically sent to their email address.

Feature – Reports


After all your accounting efforts, it all boils down to your profit and loss statement.

Source: Google

QuickbookOnline provides a detailed report as seen above that shows the sources of your income and expenses.

Source: Xero

This is Xero’s version of the profit and loss report which allows you to switch for different periods. It can also be exported and saved.

Similarities & Pricing

If you look at the 4 main features that were introduced, you will realize that both Xero and QuickbookOnline are quite similar in terms of functionality. The only difference is in terms of style and this is due to the intense competition between the 2 of them. When Xero burst into the US scene in 2012, they took away substantial business from QuickbookOnline which forced them to play catch up.

It should be noted that pricing always change over time. This pricing is extracted from both companies as of January 2016.

Xero (in USD) QuickbookOnline (in USD) QuickbookOnline (Singapore Version)
Independent Contractor: $7.99/month for 12 months (after $9.99/month)
Starter: $20/month Simple Start: $10.36/month for 12 months (after $12.95/month) Simple Start: $15/month
Standard: $30/month Essentials: $18.86/month for 6 months (after $26.95/month) Essentials: $16.10/month for 12 months (after $23/month)
Premium: $40/month Plus: $23.97/month for 6 months

(after $39.95/month)

Plus: $18.60/month for 12 months

(after $31/month)

The price of the products are listed above for easy comparison and they are all priced in USD. As you can see, QuickbookOnline had made it a point to price themselves below Xero due to the intense competition between the 2 of them. QuickbookOnline has a Singapore version that is IRAS compliant and eligible for the $200 Productivity and Innovation Credit Scheme.

For Xero, the pricing for each tiered package is straightforward as seen above. For quickbookonline, they have a lower price for a period of 6-12 months before the normal price is applied. Note that all prices are charged in USD.

Outage Drawbacks

While it is much cheaper to use cloud services, one of the major drawbacks is that you are entirely dependent on the service provider to keep its service online. For example, Intuit QuickbookOnline was not available for 6 hours in February 2009 due to ‘network issues’, for 12 hours in June 2010 and 36 hours in July 2010 due to power failure.

For Xero, they had their major outage in June 2009 ‘for hours’ when their host Rackspace was hit by power failure at its Dallas centre. These are just the major outages that last for hours that are widely reported and noted. There are many smaller outages that are ignored by the media. Just like Singapore’s MRT trains, you would have to accept imperfections in an otherwise perfect system.

So while the SaaS prides itself as being the service that is on demand and that you pay for what you consume, sometimes the problem is that you may not be able to get access when you need it the most. Once there is a power outage, it will affect a wide cross section of companies. Not only is availability an issue, your data might be corrupted and so it is always a good idea to backup your data periodically.


Nothing is perfect. The good thing is that these companies have learn their lessons and there are no major disruption in the past 5 years. Improvements have been made such as mobile access on your phones and iPAD for you, your accountants, investors and anyone that matters. These are incremental improvements so they are not written about in detail.

The main benefit of SaaS accounting software is that their low monthly cost and no upfront investments had allowed small businesses to gain access to high quality acccounting services. There are entire accounting firms in Singapore that package their services around Xero (e.g J-Accounting) and QuickbookOnline (e.g. Chiew-Accounting) for a comprehensive accounting package.

Hence it is clear that SaaS accounting is slowly but steadily gaining acceptance. While there might be a new notable entrant or an existing player that might improve their services to gain notice, for now Xero and QuickbookOnline are the 2 leading vendors.

Brought to you by RobustTechHouse. We provide Fintech Development services.

Also published on Medium.

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Showing 2 comments
  • Call Center Solutions

    Thank you for this post. Good luck.

  • Isabella

    Year ago I faced a problem with my little online shop. I dont understand anything about SaaS optimisation and I couldnt hand-pick company which can help me with it. My friend advised guys from
    They assisted me with SaaS accounting services. It works smooth now and finally makes my business profitable.

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