69. Sage Or Xero – Which Camp Are You In?

Over 20 years ago, this probably wouldn’t have even been asked as Sage was advertising that 80% of accountants would recommend their software over that of their rivals’. The campaign that featured this statistic was so successful that the whole education and training industry focused on Sage technology. This helped Sage consolidate their position as the top accounting software package for small businesses.

That Was Then. This Is Now.

Today, the statement that 8 out of 10 accountants would recommend Sage is no longer a certainty. While Sage remains a high profile piece of software, it holds nowhere near the same position as it once did, especially with the advent and growth in popularity of competitor cloud computing applications; one of which is Xero.

Xero, since its entrance to the UK market in 2012, has become the foremost threat to Sage and its dominance in the marketplace. It has also created a rivalry comparable to that of Coca Cola and Pepsi or Sega and Nintendo.

But what are the difference between the two accounting applications and which is most suitable for your business? Here we restrict our review to the cloud based versions only.

Cost And Functions

Sage One, the cloud computing version of Sage, comes in a number of varieties to offer businesses a flexible solution. The Sage One Start module costs just £5 per month and provides the user with a simple tool for them to record income and expenses.  Go up a level to Sage One Accounting and you get more functionality such as invoice processing and cash flow forecasting for £20 per month.

Another level up (Sage Live), at £30 per month per user, offers you even more functionality and is designed for those who want more than one user or business.

If you would like payroll functionality, you need to buy that separately; with packages ranging from £5 to £15 depending on the number of employees.

Xero also has three pricing levels, all of which are for unlimited users. Their cheapest package (Starter) at £10 per month gives you the ability to send invoices and manage bank accounts but you are limited in transaction volume – see below.  The second level (Standard) is £22 per month, including unlimited functions for most aspects of the financial management of your business.

The final package (Premium) is £27.50 per month and allows multi-currency accounting: a great addition for businesses which are trading internationally.

On all Xero packages, payroll functionality will cost you an additional £5/mth for up to 5 employees and and further £1 for additional employees.

See the comparisons on the table below.


Function Sage One Xero
Unlimited Users Not On First Tier All Packages
Create And Send Invoices Not On First Tier 5 on First Tier, Unlimited Otherwise
Create Bills Not On First Tier 5 on First Tier, Unlimited Otherwise
Online VAT Returns Not On First Tier All Packages
Reconcile Bank Transactions All Packages 20 on First Tier, Unlimited Otherwise
Collaborate With Accountant All Packages All Packages
Payroll None, Separate Product Additional £5/mth for 5 employees
Free Apps Not On First Tier All Packages

Ease Of Use

Both companies clearly state that they have the best system but when looking online at what customers say, it is clear that Xero holds the crown for positive reviews.  Overall, Sage has a more positive usability rating but support and online training is very much dominated by Xero.

When looking at the features and how users are rating them, Xero also holds a slender lead in ratings for:

  • General ledger
  • Inventory management
  • Order management
  • Payroll management
  • Reporting and analytics
  • Customisation
  • Security
  • Accounting Firm BPO Features

Xero is rated higher on 5 out of 8 of them. But of the three aspects that Sage has the dominant position in, two of them certainly stand out. Security is a big concern for businesses and with Sage getting a 9.5 rating compared to Xero’s 8.5, there is a significant gap between user perceptions.

With inventory management, reporting and analytics also reportedly better with Sage, the market leader still controls vital accounting areas.


Whether you have the online version or the offline version of Sage, some users believe that Sage doesn’t have the necessary development that is required of today’s modern software packages.  In contrast, Xero is applauded by users for the updates and new features that are being added every three to four weeks. There is also an ever growing range of third party software that integrates with Xero for such things as web sales, credit control (Chaser) and expenses management (Receipt Bank).

Sage needs to keep up with the market and with a larger group of competitors, they do need to consider how they are going to stay up-to-date with user demands.

There are also aspects that users are demanding to be changed on both software packages.  For example, Xero doesn’t have the invoicing system that some would like.  Sage on the other hand is criticised for lost custom reports when the system is upgraded. This has annoyed some users as it wastes valuable time.


The ongoing battle between Sage and Xero will forever be known as one of the legendary brand competitions. But answering which is best for your business is not just dependent on what features each software program has.

Like any investment in a new system, whether it is CRM, order processing or accounting package it totally depends on your business and what it needs.

If you feel this is one area you really need to look into in more detail and you need help making that choice, contact the Tectona Partnership team.

Posted in Tectona Ten - Managing Cash, Tectona Ten - Managing the Day to Day.

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