For those of us who have used Xero since their entry into the U.S., the classic Xero Expenses functionality left a lot to be desired. It was very restrictive on who could view and edit, for example, to the point where I as an Advisor could not correct my clients’ expense report errors. It was almost embarrassing for a product that prided itself on being at the forefront of the technology curve, and many of us with Xero-exclusive practices largely ignored it entirely.
However, in July 2018 Xero fully launched “new” Expenses, a dramatically different and notably #beautiful offering that had been in development for some time. It functions, to an extent, like a third-party expensing app.
Xero Expenses App
Users are encouraged to download the Xero Expenses app (available for Android and iOS), which is particularly useful for non-accounting employees with reimbursement needs. (For details on user permissions specific to Expenses, visit Xero Central here.)
In testing the app, I found it to be rich and capable, and it felt like a stand-alone product rather than an adjunct to a browser-based software platform. While the app, which includes push notifications, reinforces Xero’s position that small business accounting can be seamlessly mobile, it is not required. The entire Expenses function can be experienced through the browser version of Xero.
How Xero Expenses Works
The process starts with uploading a receipt, either in the app or browser. App uploads are scanned and held for OCR processing, while the details for those uploaded in a browser must be entered manually. Expenses can be labelled, which is akin to allocating them to a “report” in third-party apps. Those labels, as shown below, can be used as filters within a user’s Expenses screen.
The approval process is dependent on user permissions, and claim submitters can easily see where their expenses are in the process under the Your Expenses tab.
When claims are approved, they are moved to the To pay tab, and from there, a reimbursement check can be generated in just five clicks. Clicking the Pay All button from Expenses creates a Bill payable to the submitter for each of the submissions. They can then easily be reimbursed in aggregate in Xero’s Purchases module.
An additional level of functionality is the ability to indicate that expenses are to be billed to a customer. In addition to creating a Bill for the employee reimbursement, Xero creates a Billable Expense within Sales.
The new Xero Expenses solves what I thought of as the biggest problem with classic expense claims — user controls. Xero Expenses has made advisor control much more flexible.
Xero originally announced that it would be retiring the classic expense claims function in favor of this new Expenses environment, but there was tremendous pushback and they have since recanted. My suspicion is that most of that feedback came from the southern hemisphere, where practitioners built processes around an admittedly lean, but free, expense claims product, and were understandably bothered that they would have to absorb or pass on additional fees for the newer version. My experience in the U.S. has been that most advisors have ignored this functionality in favor of an integrated third-party app.
After some limited testing, I believe that Xero Expenses could compete with third-party apps except for one shortcoming — it can only be used for the reimbursement of expenses paid independently of company funds, and not for substantiation of transactions that are currently paid by a company credit card. If Xero added this functionality, I would move several of my clients from third-party expense apps.
Overall, the new Xero Expenses is a marked improvement in the platform and speaks to Xero’s commitment to make accounting beautiful.