Xero or Freeagent – 5 ways to decide which is best

Xero or Freeagent

Xero Or Freeagent – Choose The Best Accounting System for Your Business

Both Xero and FreeAgent are popular accounting systems with their own set of features and capabilities. Both are excellent.

Although a cursory comparison might imply their similarity, they fundamentally differ. While it is possible to initially opt for one and subsequently switch, this transition would necessitate a considerable amount of time and effort. It is advisable to commence in accordance with your intended direction. I suggest evaluating them based on various factors, including pricing, scalability, user-friendliness, integrations, reporting capabilities, and customer support, before reaching a decision. Ultimately, the choice depends on your specific business requirements and personal preferences.

Both systems offer free trials. More details and tutorials are on their websites. See the links below:

Why you need Xero or Freeagent

Xero and FreeAgent are both cloud based accounting software platforms designed for business owners. These systems help to organize financial records and automate bookkeeping processes. By using these platforms, businesses can comply with HMRC requirements and streamline their financial reporting. Furthermore, Xero and FreeAgent facilitate communication with accountants, making it easier for them to prepare accounts and tax returns.

Both systems have been designed and built for business owners, not for accountants. They are intended for non-expert users. They do not require any specialist accounting knowledge. Anyone who can use online banking can quickly learn to use either system.

Both systems will:

  • Save the business owner a huge amount of time and effort whilst providing tighter control on the financial management of the business
  • Retrieve data direct from your bank
  • Automate a large part of the bookkeeping process
  • Structure financial records in legally required formats for sole traders, companies and partnerships
  • Support VAT accounting and returns, complying with MTD (Making Tax Digital) requirements
  • Generate management reports
  • Provide your accountant with data in a well structured form, allowing them to prepare statutory accounts and tax returns without extensive data reformating
  • Through their Helpdesks, give users extensive free support to ensure you set up and run effectively

There are differences

Although the systems have a lot in common, there are differences, the most notable for a small business being;


Xero is undoubtably the more complex system with a greater range of functions, reports and flexibility. This might seems to make it the better system but complexity comes at a cost. It takes longer to learn and to use Xero. If you are not using it regularly, the knowledge and expertise can fade.

So unless you have a real need for the added capabilities of Xero, the relative simplicity of Freeagent is a big benefit.


Xero provides extensive support for CIS (Construction Industry Scheme) for building businesses. This includes construction contractors and sub-contractors. Freeagent provides very limited support to CIS, particularly for contractors.

So if you are a builder Freeagent will probably not work for you unless you are just a subbie and not VAT registered.

Automated Document Processing

Xero comes with a sub-system called Hubdoc. Users can input receipts and invoices in various ways, including by taking a photo using an app. Hubdoc will convert images (including handwritten documents) to digital format, sort them and input into Xero. With a bit of time spent in configuration, the whole process becomes automated, hands off.

Freeagent can do something similar but it requires a paid-for add in and even then its less flexible.


Xero requires a paid-for subscription.

Freeagent can be obtained free. Unlike a lot of free software, this is the fully functional version with no time limits or constraints. If cost saving is a priority, Freeagent wins hands down.

How to decide – Xero or FreeAgent

Xero and FreeAgent are both suitable accounting software systems for small businesses. While Xero offers a comprehensive range of features and integrations, FreeAgent focuses on simplicity and ease of use. Xero is known for its robust reporting capabilities and scalable solutions, while FreeAgent excels in streamlining financial processes and providing user-friendly interfaces.

Ultimately, the choice between Xero and FreeAgent depends on the specific needs and preferences of the business owner. As both systems offer a free trial you can look at both. As a starting point, Freeagent would server a one or two man business with relatively simple requirements. Individual consultants, buy to let landlords with just a few properties, social influencers and gamers would fall into this category.

Builders, other than very small operations, Amazon or Ebay traders, businesses employing more than a couple of staff and shops would probably need the increased functions and complexity of Xero.

Whichever you chose, you can be sure you will save yourself a huge amount of time and heartache and keep a tighter control on your business.

There are other systems…..

Xero and Freeagent are by no means the only cloud based accounting systems for a small business. Quickbooks, Freshbooks, Sage, Zoho, Kashoo are just a few. However, none offer the same blend of ease of use, customer support, reliability and reporting you will find in either Xero or Freeagent.

Spend time looking at these if you must, but if the answer is anything other than Xero or Freeagent you have asked the wrong question!

…..Or Do Not Have A System At All

It is possible to operate a business without a system for maintaining your financial records. For example, you can use spreadsheets or a paper based ledger.

This might make sense when you are starting up. It minimises costs which in early days, may be important. It also avoids having to commit time and effort in learning how to use the system.

However, once the business is generating more than a trickle of transactions, you do really need a system. A proper system will save a huge amount of time and effort and help keep your finances under control. The benefits will outweigh the cost many times over.

Given that Freeagent can be obtained for free (we can show you how), is suitable for nearly all smaller and simpler businesses and will save you a huge amount of time and effort, there really is not reason for not at least giving it a very serious road trial.

How we can help

Aston Black is accredited in both systems so can supplement the user support these organisations provide.

We also offer discounted subscriptions.

Both systems come with support from the providers, supplemented by ourselves. In addition we provide our clients with a free start up session to help you get started. We do this on a one to one basis and can taylor the session to your needs.

We can help you decide which is the better system for your business. You can start with one and swap later but this does take work so its better to start up as you mean to continue.

Contact us or give us a call on 01908 904 794, for a free, no obligation discussion.