NetSuite vs. Xero
Why Should You Make the Switch From Xero to NetSuite?

As your business expands and accounting becomes more complex, you’ll discover that basic accounting software has definitive limitations. Trying to overcome the business challenges that arise as you grow using disparate applications supplemented by spreadsheets isn't sustainable—which is why businesses frequently upgrade from Xero to NetSuite.

If you’re contemplating upgrading your accounting/business management solution, first you need to look at whether both Xero and NetSuite meet your current and future business requirements. If you want to automate key business processes, increase productivity and reduce operational costs, you should reflect on which features and functionality will support increased efficiency and scale.

NetSuite and Xero both offer software designed to help businesses manage their accounting and finance processes, but there's a substantial gap in the depth of features and scalability. Below, we compare NetSuite vs. Xero, so you can make an informed decision about which platform will provide the best foundation for your operation in the short and longer-term.

Note: NetSuite is more than just accounting software. It's a complete business management solution that incorporates full-featured accounting functionality and modules to support operational automation. This means businesses can start with a financial solution and add features as they expand, without the need to manage multiple systems or applications as they do with Xero. However, this comparison will primarily focus on both software’s accounting functionality.

NetSuite Overview

NetSuite’s financial management system supports businesses throughout their growth journey with a cloud-based platform that provides real-time data with customisable fields and role-based dashboards. NetSuite provides an entire suite of business solutions beyond just accounting. These deliver companies everything they need to increase business and operational efficiency, including SCM and manufacturing, customer relationship management (CRM), ecommerce, project management and professional services automation, field service management and more. Being built in the cloud, it provides data in real-time and requires no added IT infrastructure.

NetSuite works as an end-to-end accounting solution, enabling automatic quote-to-order fulfillment, cash flow monitoring and revenue management. It goes beyond basic accounting/bookkeeping and provides functionality that helps to reduce the requirement for additional employees. It’s designed to run your entire business, whether you're in one location or you have multiple locations and subsidiaries around the world.

Xero Overview

Xero is the starting point for many small businesses, particularly in Australia, New Zealand and Southeast Asia. It is often the first major software purchase for many small businesses thanks to its cloud accessibility, and low cost. Xero addresses the primary challenge of most small businesses, namely the management of cash flow. Business owners can keep track of their income and expenses, utilise automatic bank feeds with a variety of financial institutions, and gain visibility into the financial health of the business. Businesses can also use Xero to help them prepare their tax submissions, which can be an arduous task if done manually.

Xero is a cloud-based product that is primarily focused on accounting. It does provide basic inventory tracking and some project capabilities but relies heavily on plugging in third-party applications for advanced features and operational automation capabilities which often don’t integrate seamlessly. Detailed business reporting usually requires exporting data to spreadsheets before it can be analysed by finance teams.

NetSuite vs. Xero

Xero suits some small businesses who want to manage basic accounting and bookkeeping such as managing invoices, paying bills and very basic cash flow tracking. When accounting demands are minimal, generating month- and year-end reports and helping with annual business taxes is enough. If Xero customers require more, they are forced to turn to third-party application add-ons to bolster the functional capability of Xero, however this introduces application and integration complexity. Furthermore, Xero does not support multiple subsidiaries, so consolidating financial statements for reporting is slow and labour intensive.

In contrast, NetSuite offers a complete financial management solution that increases efficiency and reduces the need to add to headcount as the business’ financial requirements become more varied and complicated. Beyond basic accounting information, NetSuite delivers preconfigured KPIs, business process workflows, reminders and customisable dashboards that quickly show exactly how operations and accounting processes impact each other, such as inventory levels and P&L, as well as what tasks need to be completed. NetSuite supports multiple subsidiary businesses, as well as companies operating in multiple locations, and multiple languages. It delivers real-time consolidated reporting, automates currency conversions and accounts for differing tax regulations.

Businesses can configure and customise NetSuite to the specific needs of their operations. Furthermore, growing businesses face rising levels of governance and compliance, whether it's legislated, requested by investment partners or a board, or required when a business wants to undertake an IPO. With NetSuite, a business can quickly generate statements and disclosures that comply with multiple financial regulatory requirements and requests for information from investors.

NetSuite understands that as businesses grow, they no longer consider financial management and operational software simply as ‘tools’, but as strategic investments that underpin their business strategies. These businesses are looking for a partnership that can help them reach their goals. NetSuite not only provides a comprehensive range of functional and technical support, but also invests in the long-term journey of every customer through dedicated customer managers. In contrast, Xero only supports English-speaking customers, and all requests must go via an online portal.

Grading System:
= Native and solid capabilities
= Capabilities need add-on or partner integration
= Weak or no functionality

How NetSuite Capabilities Compare To Xero

The two systems may seem to offer similar functionality, but a deeper dive reveals that there are as many differences as similarities, especially when it comes to the robustness and totality of the features and capabilities.

For growing companies with ambitions for expansion, this functionality has a direct impact on the time and resources required to complete everyday financial duties.

Here’s how NetSuite’s key features differ from Xero’s.

Revenue Recognition

NetSuite enables accounting teams to comply with revenue recognition requirements and schedule revenue to be recognised automatically. This applies whether a sales transaction consists of a single action, a series of actions across time or a variety of types of deliverables in a bundle. Forecasts and financial statements are precise and updated in real time to be viewed as demanded

This is particularly beneficial for software and services companies facing multiple deliverables (including services delivered over time, upgrades or additional licenses), which require accounting teams to recognise and defer revenue at various points in time. Xero does not directly support revenue recognition and requires a third-party application or workaround to perform the task. These inevitably generate complicated recognition schedule spreadsheets and unclear or nonexistent forward-looking data or insights, all of which result in a time-consuming process for businesses.

Billing

NetSuite gives companies real-time visibility into their financial activity and billing. This creates greater transparency via consolidated invoicing, automated rating processes and support for multiple pricing models to capture setup fees, license counts and variable consumption in one step.

NetSuite’s billing capabilities are also superior to Xero’s when it comes to subscription billing. Automated renewals help businesses retain revenue and minimise manual reviews. Companies can also schedule subscription changes and set automatic customer-specific pricing and discounting. Xero has neither of these capabilities, forcing businesses to perform these tasks manually, usually via error-prone spreadsheets.

General Ledger

NetSuite’s general ledger (GL) displays accounting data from a full and consolidated level down to individual transactions. The system allows you to customise your GL to meet your unique business requirements. Finance teams and business leaders can add custom GL impact lines to transactions, including invoices or vendor bills, across single or multiple accounting books. This reduces the time and energy required for account reconciliation, audit processes and period close.

An easy-to-use chart of accounts makes categorising and reporting on transactions straight-forward, removing the timely process of sifting through hundreds of lines to see what transactions should be matched to. It also comes with prebuilt mapping capabilities between your primary and secondary chart of accounts, as well as book-specific functional currencies. Furthermore, the NetSuite Multi-Book engine records all book-specific activity based on a single business transaction from the general ledger, as well as expense amortisation, revenue recognition, depreciation, P&L allocations and more. Finally, multidimensional reporting removes the need for a complicated chart of accounts, allowing you to add tracking details at the transaction level.

By contrast, Xero has a single ledger called 'the chart of accounts'. This is a static ledger and is built using an account name, description and a manually assigned unique code. While this approach might suffice in a small business, larger businesses struggle because it's difficult to manage as Xero doesn't allow for sub accounts in the chart of accounts. There are workarounds using tracking categories, account names and account groups to help with reporting, but for more detailed insights, businesses have to export account data into spreadsheets, relying on finance teams to manually crunch the numbers each month.

Accounts Payable Automation

NetSuite automates the review, approval and payment of supplier invoices. The accounts payable process can be configured to reduce manual interventions and let participants in the process manage exceptions instead of every payment. Two simple examples of this are automatic discounting based on a supplier, or exception management when invoices do not match purchase orders. By combining a workflow engine with role- and user-based permissions, sophisticated processes can ensure that the accounting and governance controls and policies are followed.

In comparison, Xero has limited accounts payable capabilities. An invoice can be captured manually using the bill form or emailed to accounts payable and then manually captured. On submission, the form only follows a very simple approval workflow. Payments must be scheduled or manually executed. Xero does not provide for accounting controls or policies to be applied to accounts payable, and limited user roles don't provide a controlled environment with true segmentation of duties.

Accounts Receivable

NetSuite’s accounts receivable features allow you to manage your customer list, track your receivables, manage late payments through dunning letters and receive payments, all without needing to enter detailed debits and credits. NetSuite can provide customers self-service access to real-time insights on purchase orders, inventory levels and payment information through the NetSuite customer portal. Frequently transacting customers can get further assistance through invoice consolidation that reduces the amount of bills they have to pay. Furthermore, configurable dashboards, KPIs and multi-dimensional reports provide a real-time view into accounts receivable data such as customer aging, invoice analyses, recurring invoices, deferred revenue and exception reports that flag anomalies in your payments landscape.

Xero only provides basic accounts receivable capabilities with features such as invoice reminders, statements and aging reports.

Fixed Asset and Lease Management

With NetSuite, your business can manage an asset’s complete lifecycle and simply report on all fixed assets, while tracking depreciating or non-depreciating company assets from creation to depreciation, revaluation and disposal. In doing so, it’s easier to maintain and document an accurate record of all capital assets, such as asset status and acquisition costs. NetSuite’s solution also addresses the new accounting and reporting requirements for leased assets, specifically setting up amortization schedules and splitting out interest expense from rental expense for reporting purposes, both on balance sheets and income statements, which supports multiple accounting treatments.

Xero provides basic fixed asset management capability (and is restricted to the number of assets under management) and does not have lease/rental management capabilities.

Inventory Management

NetSuite’s inventory management solution gives companies real-time visibility into their inventory. It reduces manual processes by automatically tracking inventory levels, orders and sales throughout the inventory lifecycle, while providing the up-to-date insights required to make data-driven decisions. This helps businesses maximise sales and gain greater control of their operations. The system also provides warehouse management features like inventory counts, pick, pack and ship, integrated barcoding and multi-order picking.

Xero offers simple inventory tracking, however most businesses require the addition of a third-party inventory management application.

Reporting

Xero provides standard accounting reports such as profit and loss, balance sheet, aged payables and receivables, general ledger (GL) and cash flow. Business owners can also track their business health and perform basic cash predictions. Xero supports basic customisation.

By comparison, NetSuite provides a comprehensive range of standard financial reports. These reports are highly flexible and can be easily customised to see specific types of GL accounts, transaction fields or even custom field values as they are recorded on transactions. NetSuite’s reporting extends to advanced financial management such as budgets and forecasting, and reporting on complex business models. These include companies with multiple subsidiaries or operating in multiple locations using a variety of currencies and across differing tax regulations. NetSuite is always consolidating, so consolidated reporting is available in real time, rather than waiting for month-end close.

Furthermore, NetSuite allows detailed drill-down and drill-across reporting for any record in the system with simplicity. NetSuite reports do away with static reporting, giving flexible views for reports from department, location, product line or any number of operational perspectives.

Operational Automation

NetSuite not only delivers deep financial management capabilities, but also provides CRM, ecommerce, inventory management, project management, warehouse management, production, professional services management and field service on a single platform. This approach simplifies application architectures allowing businesses to focus on running their business and not wasting time managing multiple application lifecycles, data silos, integrations, fragmented processes and dealing with poor business visibility.

Why You Should Choose NetSuite

Your success and growth will create additional complexity in your business. Your underlying software needs to have the functional depth and breadth to absorb your business, financial, process, operational and transactional complexity so that you can focus on running your company. Take for example La La Land, a giftware retailer that switched to NetSuite to support its expansion. While running on Xero and its inventory app Cin7, their employees are forced to spend six days each month to manually reconcile the books for reporting.

Xero's limitations mean companies have to layer on more systems or applications for specific purposes, such as revenue management, fixed assets, procurement, order management, billing, inventory management, services delivery and more. “Xero was holding us back because it’s built for small businesses, and we wanted to grow. Since implementing NetSuite, we’ve grown by 30%.”, said Financial Controller, Veronica Rillo.

In addition, these added applications also add costs. And if these systems don't integrate, your finance team has to manage a whole host of applications, and risk errors trying to transfer and consolidate data amongst disparate programs, each with its own configurations and end-to-end processes. This is time consuming, demoralising and may require hiring new staff.

If your business is considering whether the time is right to upgrade, you must think about your current needs, your future goals, your growth and complexity. Xero might work as a solution today, but will it meet the demands of your business as you continue to evolve?