SageWhen a new product comes onto the market attempting to change the way things are done, it’s inevitable that comparisons will be made between the new product and the more established products in the same marketplace.  It occurs everyday especially when it comes to technology, a couple of recent examples being iPhone vs Samsung Galaxy or Xbox One vs PS4.

What I am trying to say is that people will always make comparisons and ultimately make a choice based a what suits them best taking into various factors such as cost, usability, features, reliability.

The same can be said when it comes to bookkeeping and accountancy software. Many comparisons and discussions will be had as to what is the best bookkeeping software for small businesses.


It’s something that I come across all the time both from others in the accounting profession and from clients / small business owners.  The short answer to the question and indeed to any comparison between bookkeeping software is that it depends on the business.  With any bookkeeping software there will be compromises that need to be made and consideration taken into account, and that’s where bookkeepers and accounts can use their skill and experience and advise a business on the most suitable option for them.

Back to the original question and topic of this post.Xero

So why did I choose to compare Xero vs Sage?

Yes, I could have just of easily picked to compare one of the many other pieces of small business software, my choice was based on what I know best.  Having been in the accounting profession for many years now I have a very good knowledge of Sage (50 and Instant) and Xero, in fact when I moved into practice some 10 years ago Sage 50 was the software of choice for the majority of my clients and I would like to think that there is very little I do not know about Sage 50 after all those years.

What I do know is that Sage 50 hasn’t really evolved during that time, now that’s not necessarily a bad thing as Sage do have a very good desktop based bookkeeping package and it suits certain businesses just fine, it’s more the fact that they haven’t moved with the times and with the recent increase in popularity of online cloud based bookkeeping solutions Sage 50 does feel a little stuck in the past.

That brings us onto Xero. Over the past few years I have had the opportunity to get to grips with Xero, setting up new businesses on Xero and converting existing users of Sage, Quickbooks and Freeagent over.

The experience has provided with knowledge and day to day experience of using both pieces of software in real life businesses and has enabled me to establish some key strengths and weaknesses of each.  The reason for this post is not to declare a winner, nor is it to tell you which one to pick for you business, the aim is to provide reasons why both can and do work well for small businesses using my experience.


Lets have a look at some areas we can compare each solution.


The basic entry version of Sage called Instant can be purchased for around £100. For that you get a single company, single user version for use on one computer.  This is where Sage is a cheaper solution if you only need access to the data from one machine by one user.  Xero on the other hand works on a subscription based price model, for similar features to Sage Instant (bank accounts, sales and purchase ledger, VAT returns) the cost is £19 + VAT£20 + VAT (as of December 2013) per month, for the price you get regular software updates and free 24 hour support.  Both updates and support for Sage are optional extras which increase the cost considerably.  Having said that I have experience of people never updating their Sage software nor using support.

Other costs to consider with Sage and Xero are additional users and companies.  If you run more than one company Sage will charge an additional amount to add a company to their software as they will if you want to add more users.  Xero users can be added free of charge and there is no limit, although an additional company would mean another £19 + VAT £20 + VAT (as of December 2013) per month (subject to a 15% discount that Xero offer for multi company users.


Having experienced users moving across from Sage to Xero many have commented how easy Xero was to use compared to Sage.  Xero certainly looks more cleaner and feels easier to navigate.  Xero has the ability to share information as users can log in and see the data live, whereas Sage is restricted to desktops and requires backups of data to share information.  Sage does have an accountant’s link function to share data with accountants and advisor’s however from experience this is not the easiest of tools to use.


Feature wise both come with the same standard features, each having bank reconciliations, sales ledgers, purchase ledgers, VAT return functions, ability to change and add codes and create new accounts.  Sage has more reporting features and the ability to produce custom reports, with certain versions having sales orders and purchase orders something Xero does not support.  Xero has better looking reports and does have purchase orders and sales orders in the pipeline (as of September 2013).

Where Xero excels is it’s ability to connect with your bank account and download bank transactions straight into the software.  This alone can be a huge time saver depending on the type of business.

Xero also provide the facility for users and customers to add to a wish list of features they would like to see, so in that respect the software is constantly evolving and improving over time.


Being a desktop based system Sage is susceptible to loss of data if something was to happen with the computer being used.  Regular backups are important to reduce this risk.  Xero’s data is stored online much like a website, the data is backed up automatically so no backup routines are required.

My conclusion based on the above criteria and past experience is that Sage and Xero are both different animals and have clear strengths in their own right.  If you are looking at software for your small business the best advice would be to trial/demo each one where possible before making a decision.