Accounting software compared: SAP vs Xero

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April 16, 2024

Any conversation about choosing accounting software will soon bring up Xero, because of its position as a world leader in small business solutions. 

Likewise, SAP is also likely to be mentioned because it, too, is a world leader in a different class - that of huge, complex organizations.

Both Xero and SAP are giants in their respective markets. But while Xero has a consistent focus on smaller businesses, SAP offers itself as an accounting solution for firms of all sizes.

This can, on the face of it, make it hard to choose between the two. If your business is relatively small, which is the right choice for you? 

We’ve put together this short guide to help inform your decision-making process. Our comparison of SAP and Xero raises the key issues you should consider as you make your choice.

What is SAP accounting software?

SAP accounting software is part of a broader suite of business tools, often referred to as an ERP (enterprise resource planning) solution. ERP systems are popular with larger organizations because they cover all the core business processes - including manufacturing, logistics, customer relationship management, human resources, management reporting, and, of course, accounting.

All these different processes are integrated into a single, massive system that, in an ideal world, brings huge efficiencies and consistency. SAP has long been regarded as the market leader in ERP solutions. 

Versions of SAP are available for businesses of all sizes.

SAP was founded in Germany, in 1972. It now has over 400,000 customers worldwide.

What is Xero accounting software?

Xero was founded with the specific goal of providing a cloud-based accounting solution for smaller businesses. It’s become hugely popular with business owners, their finance teams, and accounting firms around the world. 

It’s one of the world’s fastest-growing software-as-a-service companies and is the market leader in the UK and its home territory of New Zealand and Australia.

Alpha Pro Partners is a Xero Platinum Champion Partner, which means we’re committed to helping our clients implement and make the best use of this world-class accounting software.

Xero began in 2006 in New Zealand. It now boasts over 3 million subscribers and employs over 4,000 people. It continues to be committed to serving smaller businesses well.

How SAP compares with Xero

How easy is it to set up?

Time is particularly precious in small businesses because the team is small. While a high standard of bookkeeping and financial management is important, so is efficiency. For that reason, time spent setting up the accounting system must be minimized.

SAP has a well-deserved reputation for being a complex solution to implement. Even the version for smaller businesses isn’t straightforward to set up. Many firms hire external consultants to assist in the process, partly because of its complexity, and partly because it’s not a process you want to get wrong. 

SAP’s roots as a system for large, complex organizations mean that it has to be adaptable to many different ways of working. This flexibility, while being a benefit, also means that a huge number of decisions are required when it’s being set up.

SAP is available as both a cloud-based version and also an on-premises version. The latter requires even more setup, as you need to have the appropriate technical environment and skills for it to operate. 

Because Xero has been built specifically for small businesses, and it’s exclusively cloud-based, it is much easier to set up. The founders knew that business owners wanted to start using the accounting tools immediately because they have invoices and revenue to process and payments to make.

How the accounting features of SAP and Xero compare

Both SAP and Xero provide all the functions that a small business requires from its accounting system. These include:

  • Management reporting
  • Budgeting and forecasting
  • Accounts receivable and payable
  • Bank reconciliations
  • Billing and invoicing
  • Fixed asset management
  • Payroll
  • Project accounting
  • Purchase order management
  • Tax management

Because SAP was designed for larger businesses, it has a huge number of accounting tools and options, many of which are industry-specific.

Xero continues to add new features and functions. All are designed to be as efficient as possible, maximizing automation to make life easier for small businesses.

How does the total cost of ownership compare?

TCO, or total cost of ownership, is often overlooked by small businesses rushing to choose their accounting software.

The TCO takes into account the lifetime cost of implementing and operating the software and includes more than the fees paid to the software provider.

Other costs to consider as part of TCO include:

  • Installation, configuration, and testing of the software.
  • Training staff in how to use it.
  • How much support is required?
  • Backup and data recovery.
  • Auditing (both internal and external).
  • Upgrades.

While many SAP users are satisfied with how the software performs for them, they acknowledge that the setup and user training are often time-consuming. The software is not as intuitive as Xero.

SAP positions itself as suitable for small businesses that are looking to grow. There’s no doubt that a company that grows to become a regional, or even global, operation with offices worldwide can continue to use SAP throughout.

Xero, on the other hand, is very focused on smaller businesses. If your company was to become huge, it would eventually outgrow Xero. 

The TCO for Xero is accepted as being less than that of  SAP. It’s faster to set up, easier to learn how to use, and in many areas, it’s easier to customize.

Choose a Xero Platinum Champion Partner

Of all the many accounting systems available, we chose Xero. We believe it’s so valuable to small businesses that we have committed to only working with Xero. Not just for ourselves, but also our clients.

We help businesses set up and use Xero. We provide answers to their questions about Xero. We help ensure they can focus on running their business, rather than investing unnecessary time in operating their accounting system.

As a result of all this, we know Xero inside out. That’s why we’re a Platinum Champion Partner.

Millions of small businesses, worldwide, have discovered the value of Xero. Let us help you to do the same, and to support you on your business journey. Talk to us about how Xero can help you become more efficient and support your business growth. Get in touch with us today.

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