If you’ve seen the latest Cloud Accounting solutions and understand the benefits they bring, then…
Sage vs Xero Explained
“8 of 10 Accountants recommend Sage Software”, so Sage’s extremely successful advertising campaign of 20 years ago told us. Such was Sage’s dominance that a whole education & training industry grew on the back of Sage 50, consolidating its position as the Number One accounting software for small businesses. Limited competition at the time made it easy for accountants and bookkeepers alike to recommend Sage 50 to go-ahead SME’s, in the knowledge that they were recommending probably the best software in the market. Even to this day, Sage is recommended as a solid reliable accounting system, because its name is synonymous with small business accounting software.
Nowadays, the “8 of 10 Accountants recommend Sage Software” probably couldn’t be further from the truth as Cloud solutions have undermined Sage’s SME marketplace domination with the rise of a new order. Go-ahead businesses now have a greater choice of accounting solutions instantly accessible through the Web and delivering significant benefits over legacy on-premise solutions. These technology driven solutions enable improved service levels with the potential for cost savings and in some cases, a simplified and more streamlined solution. The following article covers some of the basic differences between Sage 50’s on premise software and Xero’s Cloud solution.
Sage is a UK company and has been building and supplying software to businesses for many years. They build software for all types of business from the very small (Sage One) to multinationals (Sage ERP X3). Their best selling software is the Sage 50 product range, which is a comprehensive generic accounting application, built for small and medium sized businesses. There is a thriving Sage Additions community, which builds industry specific add-ons to extend the appeal and functionality of Sage 50 to a wide range of industry sectors. The most recent addition to their product portfolio is Sage One, a true online accounting application which has been a long time coming.
Other than Sage One, you generally purchase Sage software and therefore own the rights to use it and to install it on your Computer. Sage regularly updates the product with “New” features, so you are recommended to take out annual Sage cover which includes upgrades to the latest versions when available. If you don’t take out Sage cover then you will have to pay for the upgrade, but you can then decide when and which version you would like to upgrade to. Sage 50 tends to be sold as a 1 Company 1 user initial licence, so you will have to pay more for Multiple Companies and Users. However, all this has recently changed with Sage announcing a number of improvements to to the latest version of Sage 50, which notably includes “Sage Drive”, a feature that allows you to access and share your data via the Cloud. They have also changed their pricing policy, so you can now pay monthly and receive automatic upgrades to the latest version.
Sage 50 software can be described as a “Client Server” application i.e. software is installed on a PC (the client) and a separate database is installed, which the client software connects to using ODBC. Sage 50 Professional can be installed on a network, so that multiple users on networked PC’s can access the database, usually installed on a network server. The software is hardware dependent, so issues can arise when running the software on older PC’s with limited processing power and memory. Sage Drive appears to be an extension of this logic, by synchronising a copy of the database to the Cloud, where it is available for other users to access and update.
Sage recommends customers to always upgrade to the latest versions, which can sometimes include more than just additional features. They also provide a download facility from within the software to download important bug fixes and enhancements, so users should regularly check for updates and/or bug fixes and download and install them. For non-technical users, this can be confusing and we find this is an area often overlooked by Sage users.
You are responsible for backing up your data and Sage 50 includes a backup routine which backs up the data files to a chosen location. This can be a backup disk, device or Cloud service.
You are responsible for securing your data, by taking adequate steps to minimise the risk of hardware failure and ensuring passwords are used to access the application. This will include such steps as perhaps taking out an IT support contract and using a Cloud backup service that should be run at least weekly.
Sage 50 can best be described as a generic accounting application. So as well as having to choose which version of Sage is suitable for your business, your users will also need an understanding of accounting terminology and practices to be able to use the software to its full potential. Training is highly recommended to gain a full understanding of how it can be used and configured. It is recommended that you use the services of an expert to set Sage up with a logical chart of accounts appropriate to your business and to generally give advice on the software and it’s usage. The rest of this section will focus on Sage 50 Professional.
The software is Menu driven with shortcut buttons in a left hand window for the users to quickly access key modules. All modules have Tasks and Links to quickly access key features and these can be tailored to individual user logons. This additional configuration is recommended, because it will help users to focus on the areas of the application they use and speed up their learning. Access to detailed data is by running reports and setting specific criteria – reporting is comprehensive and data can be output in a number of formats, including CSV and Excel.
Sage 50 Professional comes complete with Quotations, Projects, Sales and Purchase Order processing, Products for Stock control as well as standard features for the control of Suppliers, Customers, Bank and Financial Reporting. Foreign Trader can also be activated for handling transactions in foreign currencies.
Sage 50 has a level of integration with Microsoft Office (Outlook, Excel and Word) to import/export diary event and contacts or export data to Excel. You can also import specific data using pre-supplied Excel templates for customer and supplier records, product and project records etc.
Within the Help section, there are a number of video tutorials and PDF guides to help familiarise yourself with this comprehensive application.
There is no doubt that a product such as Sage 50 Professional delivers an excellent accounting application to growing businesses with many useful features to help business owners effectively run their business. You will have to decide which version is most suited to your business, because you may not require all of its features and some operations will find they need additional features. As previously mentioned, you can purchase Sage approved Additions to extend the functionality of the software for your business.
Xero is a New Zealand based company who initially build their software for the NZ market. The rapid adoption of the service encouraged the developers to go global and the service was made available in Australia, the UK and the USA. Their growth has been remarkable from 200 customers in 2007 to 157,000 by 2013 and the next target 1 million in these countries.
Xero is updated regularly, but unfortunately, due to their worldwide growth, we are seeing a slow-down in promised feature releases and general improvements for the UK market. Nevertheless, their ambition is palpable and their objectives for the software impressive and the recently acquired funding leaving us in little doubt they will achieve their objectives.
As with Sage, there is a thriving Add-on market, which produces industry specific Cloud applications that integrate with Xero using Web services i.e. data is sent from one application to update the other through the web.
Xero is a hosted application (Cloud), which is accessible by subscribing to the service either directly or through a Xero Partner. The service is accessed using a Web Browser, so a reasonably fast internet connection is required to see the greatest benefits. Multiple users can access the service at the same time and data is updated in the background to avoid any conflict. New features are rolled out centrally by Xero and users are notified in advance of this happening. A sophisticated service delivery infrastructure is in place to achieve 100% uptime (actual 99.99% since 2007) and data security, so subscribers do not need to do anything extra.
Xero take security seriously, as you would expect from a global organisation hosting thousands of customers’ data. Security is an ongoing process, continually audited and tested for potential breaches and comprises “Internet Banking” levels of encryption, biometric systems based restricted access and 24/7 onsite security guards at the hosting locations. Multiple copies of customer data is held at multiple locations for real-time protection and as a further safeguard, data is backed up daily. This compares favourably to desktop software, where your data is at risk from hardware failure, theft or data corruption from power surges. Furthermore, Cloud data is available for sharing online with individuals you invite to share your data, so for example, Accware Limited can access your data online, so you do not have to email us backups of your data or send CD/SD Card/DVD’s in the post.
Xero is a simplified accounting solution for small and growing businesses. Users do not need to have any accountancy training and can learn how to use it quite quickly following a short introduction. There are also short videos on the Xero website covering virtually every area of Xero for ongoing learning and support. Nevertheless, it is recommended that you use an expert to set up the system appropriate to your business needs. Furthermore, the ability to collaborate with us as your Accountants enables us to provide exceptional levels of service and support.
Xero opens with a Dashboard summarising key information. This can be configured to a certain extent to display key indicators and bank accounts. Key data is linked to the underlying detail so you can quickly check movements and drill down into detailed data using the hyperlinks littered throughout the system..
One of the most useful features of Xero is the Bank Feed. This allows you to link your Bank Account data to Xero, so it is pulled in daily for you to reconcile and track your cash flow. The Bank Reconciliation is also easy to use and allows you to quickly allocate payments and receipts against sales and purchase invoices or to “transfer” funds between bank accounts on the one screen. A useful trick is to open multiple tabs to display data in other areas of the application, such as detailed bank transactions and a specific purchase invoice, if you thought you had already paid it.
All reports can be output as PDF files or to Excel and there are Excel templates for importing data from other systems. Xero also has a tracking facility, which can be used for departmental analysis and reporting and the top version of Xero includes foreign currencies.
Xero also has a separate website for comprehensive context sensitive help and numerous short video tutorials to help users reaffirm and extend their knowledge of the application.
Xero offers a sophisticated yet simplified way for small and growing businesses to run their internal accounting. If you need more sophisticated features then it is best to view Xero as a ledger to pull together your financial transactions and look at the wide variety of add-ons that will possibly provide what you are looking for.
It is perhaps unfair to compare Xero with Sage 50 Professional, because Sage 50 Pro includes a number of features not yet available in Xero. Sage 50 overall is a great piece of accounting software that has stood the test of time and depending on the version you buy, you will find there are many useful features to help you run your business. However, technology moves forward at a rapid pace and Sage 50 now looks a bit weary in comparison with modern systems.
Cloud solutions provide a number of benefits over applications such as Sage 50 and I remember a number of years ago thinking if only Sage 50 could be delivered as a true web based solution. Sage has made Sage 50 Professional available as a hosted application through Sage Accountant partners, but the annual cost is expensive. They have also finally addressed the growing threat to their business from Cloud solutions by delivering Sage One to the market. We have not evaluated this version, because it has come too late and we cannot see how it can offer any benefits over Xero or even Kashflow (which we also support), that have been around for much longer.
If you are a Sage Instant Accounts user then you should look at Xero, if you are not using the full features of Sage 50, then you should also look at Xero. The reasons are that you will benefit from reduced onsite risks and potentially gain significantly improved support and services from us, your accountant. Sage 50 data can be migrated to Xero, so if this is something you are interested in then please get in touch.
If your business is built on Sage 50 and you have staff experienced in using the software then it’s probably best to stick with Sage. You’ve made the investment in the software and training and only need to pay for support and/or updates (which have recently increased significantly in price). You could also look at installing Sage on a Cloud server to reduce some of the risks associated with an on-premise solution, unless there is a strong business case or desire to migrate to the Cloud.