We talk to a lot of businesses on a daily basis.
And if there’s one common thread that comes up with just about every business that’s looking to upgrade their accounting software, it’s this:
Choosing is confusing.
So to make things easier, we’ve put together an in-depth guide to give you a side-by-side comparison between two of the biggest names in business accounting software: Sage and Xero.
In this guide, we’ll cover set-up costs, inventory management, accessibility, and customisation – giving you everything you need to know to make an informed decision before you make the leap into a new way of managing your accounts.
Ready to learn more? Let’s start with the big one:
One of the first things we do with each of our clients here at BlueHub is to look at their turnover.
We then use that as an initial gauge to get an idea of what kind of accounting package they’ll need.
It’s not just a measure to help them budget – it’s also a general measure of how complex their accounting needs are likely to be.
For example: a very small business (with a turnover of less than £50k) would be a good fit for the standard version of Xero (without an add-on) – but it probably wouldn’t make sense to invest in something as costly as Sage 200.
Once we start to look at businesses with bigger needs and a larger turnover – the kind of businesses that often need an inventory add-on for their Xero installation – we can start to compare the two different accounting products directly.
As a rough guide, we find that most businesses that are a good fit for either Sage 200 or Xero (along with an accounting add-on) have an annual turnover that lies somewhere between £1 million and £25 million.
If your business lies outside of this range, your needs are probably either too complex for what these packages offer – or not complex enough to justify the cost.
Once we have this kind of business in mind, we can start to put a number on the total cost of getting started with each package:
What does a move to Sage 200 cost?
From our experience in talking with our clients and other businesses, we’ve found that companies with a turnover in the range above have reported the following:
A move or upgrade to Sage 200 will usually cost £15k to £80k.
That’s for their first year of software and implementation. And it doesn’t take into account any additional costs, like the price of servers, upgrades, or an annual support fee.
What does a move to Xero (with an inventory app) cost?
With a cloud-based accounting package like Xero, the implementation costs are much lower – and a typical company in the same turnover range should expect the following:
A move or upgrade to Xero (with inventory apps) will usually cost £7k to £25k.
And on average, most of our clients end up with an ongoing cost between £250 and £350 per month (in total, not per user) after that.
That initial cost (of £7k to £25k) is usually spread out over a few months, and it covers the whole conversion process from start to finish: planning, migration, training, testing and launching.
But what about Sage’s cloud packages?
If you’re looking at one of Sage’s newer cloud offerings (like Sage 200cloud), you might expect an ongoing cost of around £200 per month per user.
But it’s worth keeping in mind that, at the time of writing, Sage 200 cloud is an extremely new product. It’s got a relatively small user base, and it hasn’t yet been through the same development and testing as the more established Sage 200.
So for the purposes of comparison, we’ll assume that most cautious businesses will be paying attention only to the established and proven products: Sage 200 and Xero.
So what’s the verdict?
As you can see, there’s a substantial difference in cost when you compare a move to Sage 200 with a move to Xero.
And Xero comes out ahead as a clear winner in terms of pricing – even with an additional inventory app added on.
Before we can start to make any fair comparison between Sage and Xero, we need to cover one important distinction between them:
For any product-heavy business, Xero alone won’t be enough
Without its essential inventory add-ons, the vanilla version of Xero won’t be able to cover things like:
- Bills of materials
- SKUs (Stock Keeping Units) limit of 4,000
- Discount rules
- Assembly and Disassembly
- High numbers of product categories, or custom fields
- Or stock alerts and warehouse management
Sage, on the other hand, does come with some of these features as standard. And for any business with a warehouse or manufacturing department, using a single system to cover both inventory and accounting can seem like an attractive option.
But that’s not the whole story.
Sage has limited options for inventory management
While Sage 200 can handle things like warehouse management and bills of materials, it doesn’t come with things like:
- Accepting online quotes
- Links for paying invoices
- Automated invoice reminders
- Flexible reporting
- And e-commerce integration
Which means that, if you need a full range of options for managing your inventory, you need to look beyond a simple comparison between Sage and Xero on its own.
With the right inventory add-ons, Xero can handle everything
Because of its design, Xero comes with the ability to fully integrate with its add-ons.
That means you can get the advanced features you need through powerful third-party apps that link up directly to your Xero accounting service – filling in all the missing functions listed above that the basic version of Xero was missing.
With Xero add-ons like Cin7, DEAR, or Unleashed, you’ll be able to give your warehouse or manufacturing business everything you need to fully manage and control your inventory – turning vanilla Xero into a comprehensive, all-in-one platform.
In effect, these powerful add-ons become the core package where you get the important functionality. Xero acts as an accounting hub that collects all of their data and turns the numbers into something you or your accountant can use.
So who’s the winner?
At first glance, it looks like Sage is a more fully equipped platform when you compare it to the standard version of Xero without any of its add-ons.
But Sage has its limits.
Once you start to look at Xero combined with a best-in-class inventory add-on, it becomes a complete suite of tools that’s both more customisable and feature-rich than Sage.
And with a huge range of other add-ons and apps, Xero can become a vastly more automated and efficient platform that far outstrips what Sage 200 can offer.
Modern accounting packages are becoming more and more flexible. And that’s mostly due to their ability to support add-ons.
These extra bits of software can be linked up to your standard packages, giving you additional functionality or advanced tools beyond what each platform can usually provide.
But where you’ll see a big difference between Sage 200 and Xero is in the level of choice you have.
Sage has extremely limited options for add-ons
To a degree, Sage 200 is customisable through its different modules.
These are pre-built components created by Sage that let you expand your basic financial package – things like Stock Control, Bill of Materials, and Manufacturing.
But because Sage doesn’t use an API (Application Programming Interface, which we’ll come to later), there just isn’t really a marketplace of external apps and add-ons that can integrate with Sage.
There are a few companies out there creating add-ons for Sage.
But they’re rare – and because Sage doesn’t use an API, these add-ons need to be constantly updated and modified, which makes them costly to maintain.
Xero has a huge marketplace for add-ons
Because of its modular design, there’s an entire ecosystem of add-ons out there for Xero – and it’s growing every day.
As well as the smaller, quality-of-life add-ons you might expect, the Xero Marketplace can give you access to more than 700 powerful tools to help you with your:
- Inventory Management
- Financial analysis, cash flow and reporting
- Human Resources
- And much more
In many cases, these add-ons will be doing more of the hard work than Xero itself – Xero becomes the outer shell that processes and finalises the real work that’s being done by the add-ons.
Here’s a quick example:
Xero usually comes with a monthly limit for transactions.
But once you integrate it with a sales add-on (like A2X for Amazon), the processing of those transactions happens inside the A2X add-on.
That means that a large number of transactions can be processed by A2X, and then grouped together into one transaction before it’s exported to Xero.
So as far as Xero’s concerned, you’ve only used up one transaction from your monthly limit – which means that, by taking on the brunt of the work, A2X has effectively helped you to bypass Xero’s monthly limit.
By far, one of the biggest things that our clients love when they switch to cloud accounting is how accessible everything becomes.
Not just in terms of using their accounting package on the go – but also in terms of the depth and insight they get with their financial reporting.
And when you’re comparing a cloud package like Xero with a non-cloud package like Sage 200, there’s a huge difference.
Sage is server-based and static
With a product like Sage 200, the software is installed locally.
If you want to access it remotely, you’ll need a VPN (Virtual Private Network) – which just isn’t convenient for the average business owner or accountant.
And while Sage 200 does have some decent reporting options, it’s not as easy to access them, and you won’t be able to heavily customise your reports.
Xero is cloud-based and mobile-friendly
Because Xero is based in the cloud, you can get access to it anywhere, on any device.
You won’t need to be tied to a particular computer or office – and that means you’ll have full access to your accounting and inventory management on the go, wherever you are.
On top of that, you’ll also have better access to reports, with deeper insights.
Xero’s external add-ons (such as inventory apps like Cin7) come with in-depth reporting features that can be customised to your business’s needs.
You can filter and search through your data with ease, produce up-to-date forecasting and stock management reports, and even schedule reminders to be sent out to different employees based on different conditions.
So which is more accessible?
Based on the reporting alone, Xero and its add-ons are a game-changer for many of our clients. We’re constantly getting positive feedback about the level and depth – and ease – of its advanced reporting functions.
And once you add in the mobile-friendly, remote-working access of its cloud-based design, it’s a clear winner – Xero and its add-ons simply give you more.
The above is an example of an advanced report in CIN7. This inventory system allows you to use forecasting reports in order to automatically calculate average sales. Advanced reporting in CIN7 allows you to automate the reordering of products based on automatically generating purchase orders depending on the products stock levels for the safety and optimum stock quantities. An example of a client whose business excelled using Cin7’s reporting is Selectequip, see their case study & testimonial here:
Integration and Scalability
Before we can dive into discussing how the two different platforms can be upgraded and modified, we need to briefly explain a little bit about API.
API stands for Application Programming Interface.
In simple terms, this just means a consistent piece of code that allows external apps and add-ons to interact with the accounting package.
And when it comes to integrating third-party apps and upgrading your software, this API is crucial.
Xero uses an API to easily integrate with over 700 add-ons
This consistent piece of code allows other developers to build on Xero with their third-party apps and add-ons.
And because this piece of code stays consistent, it doesn’t matter how much Xero gets updated over the years:
With an accounting package that uses an API, add-ons remain compatible forever.
That means that the 700 add-ons available on the Xero Marketplace don’t need to be constantly updated by their developers as Xero matures and grows.
In fact, that’s the main reason why Xero has such a thriving marketplace for add-ons and apps.
By making integration and compatibility easy and consistent, they’ve allowed for an ever-expanding library of additional functions and improvements you can make to your basic Xero accounting package.
And that means that, with the right combination of add-ons, it’s easy for us at BlueHub to create a tailored Xero build that fits your business and its specific needs.
Sage 200 doesn’t use an API – and that makes add-ons difficult
There’s a reason why most of the ‘add-ons’ available to businesses on Sage 200 are modules built by Sage themselves.
Without an API to give add-on developers a consistent interface with Sage, it becomes incredibly costly and time-consuming to keep any add-on up to date.
As soon as someone changes their version of Sage or their server, developers have to change their add-ons – and ultimately, this just isn’t a worthwhile struggle for the developers.
However, this may eventually change in the future.
With its newer cloud offerings (like Sage 200cloud), it’s likely that Sage will one day build an API to allow the same easy integration and consistent compatibility that Xero currently has.
But as it stands, this is one area where there’s really no contest.
So what does that mean for you?
In effect, it means that Sage 200 simply won’t give you the same options to expand and modify your accounting package as your business grows and its needs change.
For the most part, you won’t have access to a diverse range of add-ons to help customise your software – and when you do, it’ll be much harder for the developers of those add-ons to make sure they keep working and stay useful.
But with an API-ready package like Xero, you’ll get access to over 700 fully functional and up-to-date add-ons ready and available on the Xero Marketplace – which means that together, we’ll be able to build the best accounting software package for what your business needs.
To sum up:
We’ve covered a lot of ground in this guide.
And if you’re just starting to look around at all the different accounting options, it can be a lot to take in.
So here’s a quick summary to help you remember all the big differences:
- Sage 200 comes with a much higher initial cost than Xero – even with the addition of Xero’s essential inventory add-ons.
- Sage 200 has some decent inventory options – but the combination of Xero and the right add-on covers everything a business needs.
- Xero has over 700 external apps and add-ons to choose from – Sage 200 has very few third-party add-ons to help you customise your package as your business scales.
- Xero is mobile-friendly and accessible on the go, with insightful reports that can be heavily customised.
Still confused? We’d love to help. Book a call or find us on social media and we’ll help you out with any questions you have.