Cloud Accounting Small Business Xero

Xero Expenses — Definitely Worth Another Look

Written by Amanda Aguillard

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.

Amanda Aguillard will present the session, You Sold it, Now What? Transform Your Client Onboarding Process, at Accountex 2018 in Boston, on August 23. Click on this link for a complete list of conference speakers.

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.

Xero Expenses functionality

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.

Xero Expenses functionality

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.

Xero Expenses functionality

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.

Xero Expenses functionality

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.

About the author

Amanda Aguillard

Amanda Aguillard decided to become a CPA when she was 16, and never looked back. She started Aguillard Accounting LLC in 2012, committed to running a cloud-based practice from anywhere in the world.

In 2017, she co-founded Bluewire Strategy, a consulting group that empowers traditional accounting firms to fully embrace the cloud using process and technology. She has been a Hubdoc Top 50 Cloud Accountant for the last two years. She was the Xero Evangelist of the Year in 2016 and used her experience as an instructor of the Xero Certification course to co-found Elefant, a continuing education company for accountants and bookkeepers.

While she holds a Masters Degree in Taxation from the University of Denver, she would much rather help other advisors leverage technology to build their dream practices. She regularly speaks at state CPA societies and industry technology conferences like Clio Cloud Conference and Xerocon. She spends any spare time cooking for her two kids and reading historical fiction. She is slightly obsessed with Penzey’s Spices and Chris Thile.

3 Comments

  • Amanda, I noticed that this article is dated August 17 which is only a short while from July 31 when Xero purchased the Toronto-based (I am also located in Canada) third-party app, Hubdoc–your bio mentions that you are a Hubdoc Top 50 accountant.

    I have only been with Xero less than two years and have not used the Xero Expenses feature yet although I am looking to do that very soon. However, this new development does leave me a bit confused. Since Hubdoc apparently will remain a stand-alone product in the third-party marketplace, do I begin this accounting feature with Xero Expenses or do I start with Hubdoc? I would greatly appreciate your opinion on this!

  • Hi there- I think you need to first look at your requirements. If you are looking for an employee-facing, mobile expense reimbursement platform, Xero Expenses would be great. At this point, Xero does not match with lines running through a company bank or credit card. It is strictly for reimbursing personally paid expenses. If you want something that automates at more of the firm level, Hubdoc is your jam. It not only matches will bank line items, but will also grab bank data (and sometimes check images) which is very helpful in firm workflow.

    They are really two different animals.

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