KashFlow, FreeAgent or Xero: weighing up accounting options

SMBs are spoiled for choice when it comes to cloud-based packages. Former accountant Dennis Howlett casts his eye over three leaders.

Over the past seven years, I've been watching as first KashFlow, then FreeAgent and finally Xero came to market with solutions aimed at solving the financial headaches experienced by many small businesses. Others have come along but it is clear these three are establishing themselves as leaders, albeit serving different customer needs. They stand in stark contrast to Sage's on-premise and cloud offerings: they are all growing wildly while Sage shrinks.

None of the three are what you would call mega-vendors. The cloud model means that without hundreds of thousands of users, they won't become billion pound businesses any time soon. But in all cases, they have rethought what accounting means in the context of cloud operations and 21st century business needs. That is impacting the professional accounting market. Today, I see more and more practices recognising that real-time shared access to financial data has a positive impact on their ability to provide better services. Just what's needed in a recessionary economy. All three vendors have active and enthusiastic user communities and enjoy impressively low churn rates. Here's my take on each going in chronological order.

KashFlow - is led by Duane Jackson who makes no bones about where he sees the main market competition. Almost from the get go, Jackson has consistently tried to annoy Sage, often successfully, with witty campaigns that point to Sage weaknesses. Possibly his best effort came when Sage attempted to launch a cloud offering in the UK in 2009 that was fundamentally insecure. That product was quickly killed off. Today, much of Jackson's attention is still on Sage but now he's growing a company that needs adult supervision. To that end, KashFlow has hired a senior industry person (as yet unannounced) to take on day to day operations. I'm also told that Jackson has sold a part of his majority holding for a 'seven figure sum' but still maintains control. 

KashFlow offers a broad accounting system that appeals to many types of small business user and especially those that only need something relatively simple. You could describe it as 'book-keeping plus.' KashFlow pitches itself as being very easy to use and customers I have spoken with say they love it. Practitioners are equally happy. KashFlow has many points of automation. For instance you can set it up to automate billing. Useful if you send an invoice for the same amount each month. KashFlow also understands the type of inbound invoices you receive so that it can auto allocate to the correct general ledger account code. Unusually, KashFlow allows users to create custom fields for billing. An example might be 'purchase order number.' And of course you can bill in any currency you like. The currency conversions are taken care of automatically.

Very early in its existence, KashFlow made the decision to present developers with open APIs. At one time I was sceptical about some aspects of this from a security standpoint. My position has softened, largely because we've not heard about any data breaches. What's more, KashFlow has expended a lot of effort refactoring to build out multi-user permissions that will allow customers to control access to the system. The implications are that in the long term, KashFlow customers will be able to give permissions to both customers and suppliers. That's a very good thing.

On APIs, KashFlow has a large set of integrations and add-ons. The list is extensive including payroll and payment processors - key requirements for any business. The company is also re-engineering its codeline to be more easily adapted for mobile operations. Again, this is a good thing because it should mean the company can devote more resources to feature build out rather than code maintenance. One thing that is lacking for which KashFlow says it will have an answer: automated bank feeds. These provide an easy way for users to get their bank data into the system quickly and accurately. KashFlow offers simple pricing: £17.99 a month.