Published: February 2025

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For Australian small and medium-sized enterprises (SMEs), selecting accounting software is a critical decision to streamline finances, ensure ATO compliance, and save time. With options like Xero, MYOB, and QuickBooks, the choice can be challenging. A key consideration is that software with a large user base often provides more support, resources, and integrations, making it a practical option. In Australia, Xero is the most widely used cloud accounting platform. This blog post examines why Xero’s popularity benefits SMEs, offers market share calculations, compares it to MYOB, illustrates its value for Australian law firms, and elaborates on popular Xero add-ons, using data-driven insights.

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Xero’s Market Dominance: How The Numbers Stack Up

Xero has a significant presence in Australia’s cloud accounting market. According to the Xero FY24 Annual Report, the company had 1.77 million Australian subscribers as of March 2024, up 13% from 1.57 million in FY23. The Australian Bureau of Statistics (ABS, June 2024) reports approximately 2.66 million SMEs (businesses with 0–199 employees) in Australia. Here’s the market share breakdown:

• Market Share (All SMEs): 1,771,000 ÷ 2,656,648 ≈ 67%. Accounting for partners managing multiple clients, assume 70% of subscribers are unique SMEs (1.24 million), yielding a 47% market share among all SMEs.
• Market Share (Cloud Accounting): Only 50–70% of SMEs use cloud accounting (roughly 1.3–1.8 million). Using 1.5 million as a midpoint, Xero’s share of the cloud accounting market is likely 70–80%.

Xero’s user base surpasses competitors like MYOB (estimated at 30–40% of the cloud market) and QuickBooks (10–20%). A larger user base means more support, integrations, and resources, which are critical for SMEs choosing software.

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Why Popularity Matters for Accounting Software

A widely adopted platform like Xero offers practical advantages for Australian SMEs due to its extensive support network, integrations, and resources. Here’s why:

1. Extensive Support Network

Xero’s large user base—potentially 47% of SMEs and 70–80% of cloud accounting users—creates a robust support ecosystem:

• Accounting Partners: Xero’s global network includes over 100,000 accounting and bookkeeping partners, with a strong Australian presence. SMEs can find Xero-trained advisors such as Scale Suite in urban or regional areas for tasks like BAS lodging or tax planning.
• Online Resources: Xero Central offers tutorials, forums, and guides. With millions of users, SMEs can find answers to specific questions, such as managing trust accounts for law firms, from peers or experts.
• Training Opportunities: Xero’s Xerocon events and regional roadshows in Australia connect SMEs and advisors with training on features like payroll or reporting.

2. Broad App Ecosystem

Xero’s popularity drives its Xero App Store, hosting over 1,000 third-party apps, enhancing functionality for Australian SMEs:

• Local Integrations: Apps like Deputy integrate with Xero for workforce management, useful for businesses with casual staff. Law firms can use Actionstep for practice management, syncing client billing with Xero.
• Industry-Specific Tools: From expense tracking (e.g., Receipt Bank) to time tracking (e.g., Tsheets), SMEs can customise Xero. This flexibility exceeds that of smaller platforms.
• Bank Feeds: Partnerships with Australian banks (e.g., ANZ, NAB) provide real-time transaction feeds, helping SMEs manage cash flow amid economic challenges like inflation.

The large user base attracts developers, ensuring more apps and updates compared to platforms with fewer users.

3. Access to Resources and Insights

Xero’s scale enables tools and data that benefit SMEs:

• Xero Small Business Insights (XSBI): This program aggregates anonymised data to provide economic trends, used by governments and advisors to support SMEs. SMEs can access benchmarks to compare performance with peers.
• Sustainability Tools: Xero offers third-party apps to track carbon footprints, helping SMEs meet ESG requirements for government tenders or eco-conscious clients.
• Stable Core Features: Xero’s core features—general ledger, invoicing, bank reconciliation, and reporting—have remained consistent for the past decade, ensuring reliability. While incremental updates like AI-driven analytics enhance functionality, the stable core provides familiarity.

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Popular Xero Add-Ons for Australian SMEs

Xero’s extensive app ecosystem is a key benefit of its popularity, allowing SMEs to tailor the platform to their needs. Below are details on some of the most popular add-ons, including Xero Payroll, ApprovalMax, Hubdoc, Dext, Fathom, Stripe, and Chargebee, based on their functionality and relevance for Australian businesses:

• Xero Payroll:
  • Functionality: A Xero-built add-on for managing payroll, seamlessly integrated with Xero’s accounting platform. It handles pay runs, superannuation contributions, and ATO compliance, with automatic updates for tax changes. Employees can access payslips, submit timesheets, and request leave via a mobile app.
  • Benefits for SMEs: Simplifies payroll for businesses with 1–200 employees, ensuring compliance with Australian superannuation and tax laws. Real-time syncing with Xero’s general ledger reduces manual work.
  • Pricing: Included in Xero’s Standard and Premium plans, with additional per-employee fees (~$10/month per employee).
  • Use Case: Ideal for law firms managing salaried staff and contractors, ensuring accurate super payments and ATO reporting.
• ApprovalMax:
  • Functionality: Automates approval workflows for bills, purchase orders, and sales invoices, integrating with Xero to enhance financial controls. It supports multi-step, multi-role approvals, using Xero’s tracking categories for department-specific workflows. Bills marked “Awaiting Approval” in Xero are processed through customised approval flows.
  • Benefits for SMEs: Reduces manual approval processes, improving governance. For example, a law firm can route bills to department heads based on cost centers (e.g., “Litigation” or “Corporate”).
  • Pricing: Starts at ~$49/month, depending on the number of users and workflows.
  • Use Case: Useful for SMEs with complex approval needs, such as multi-department firms requiring oversight for high-value expenses.
• Hubdoc:
  • Functionality: A Xero-owned data capture tool (acquired in 2018) that extracts information from bills, receipts, and bank statements, publishing it to Xero. Users can snap photos, email documents, or scan them, with data synced to Xero’s Chart of Accounts and bank feeds. Documents are stored securely in the cloud.
  • Benefits for SMEs: Eliminates manual data entry and paper-based filing, saving time. Its integration with Xero HQ provides a unified view of financial activity.
  • Pricing: Included in Xero’s Starter, Standard, and Premium plans; standalone pricing is ~$12/month after a 30-day trial.
  • Use Case: Perfect for law firms digitising client expense receipts or supplier invoices, ensuring audit-ready records.
• Dext (formerly Receipt Bank):
  • Functionality: A “pre-accounting” tool that collects and extracts data from receipts, invoices, and bills, syncing with Xero’s Chart of Accounts, purchase ledger, or bank accounts. Users can photograph receipts or email documents, with automated coding and Xero HQ integration for notifications.
  • Benefits for SMEs: Streamlines expense tracking and reduces data entry. Its automation rules allow pre-coding for regular suppliers, making it efficient for high-volume transactions.
  • Pricing: Starts at ~$20/month for business accounts, with a free trial.
  • Use Case: Law firms can use Dext to process travel expense receipts for staff, ensuring accurate coding and quick export to Xero.
• Fathom:
  • Functionality: A financial reporting and analysis tool that pulls Xero data to create customisable reports, dashboards, and forecasts. It supports KPI tracking, benchmarking, and consolidations, ideal for advisory teams and businesses needing deeper insights.
  • Benefits for SMEs: Enhances Xero’s basic reporting with visual analytics, helping SMEs track profitability and cash flow. Real-time data syncing ensures up-to-date reports.
  • Pricing: Starts at ~$39/month for single companies, with custom pricing for over 100 companies.
  • Use Case: Law firms can use Fathom to analyse practice area profitability (e.g., family law vs. commercial) and forecast revenue for strategic planning.
• Stripe:
  • Functionality: A payment gateway that integrates with Xero to process credit card, debit card, Apple Pay, and Google Pay payments for online invoices. It automatically creates and matches invoices in Xero, supports one-time and recurring payments, and calculates taxes in over 40 countries.
  • Benefits for SMEs: Speeds up payments with “Pay Now” buttons on Xero invoices, reducing reconciliation time. Its fraud protection and 3D authentication enhance security.
  • Pricing: 2.9% + $0.30 per transaction, with an additional 0.5% for tax calculation.
  • Use Case: Law firms can invoice clients via Xero with Stripe links, ensuring quick payment for retainers or legal fees, with automatic Xero reconciliation.
• Chargebee:
  • Functionality: A billing management platform for recurring transactions, designed for SaaS and subscription-based businesses. It integrates with Xero (and Stripe) to sync invoices, payments, credit notes, and taxes, streamlining subscription management and tax filing (e.g., Australian GST).
  • Benefits for SMEs: Centralises subscription data, reducing manual work for recurring billing. It supports detailed financial reporting and client retention analysis.
  • Pricing: Starts at ~$549/month for the Rise plan, with enterprise options requiring custom quotes.
  • Use Case: Law firms with subscription-based services (e.g., ongoing legal advice plans) can use Chargebee to manage client billing and sync data to Xero.

These add-ons leverage Xero’s large user base, ensuring robust support and frequent updates. For example, Hubdoc and Dext benefit from Xero’s scale, with refined data extraction driven by millions of user transactions. SMEs can mix and match add-ons to address specific needs, such as payroll for staff management or Stripe for faster client payments.

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Xero vs. MYOB: A Balanced Comparison

MYOB is a key competitor, particularly for SMEs familiar with its desktop software or needing advanced payroll features. Xero’s cloud-based platform and larger user base offer distinct advantages. Here’s a comparison:

Advantages of Xero Over MYOB

• User Interface: Xero’s cloud-native design is intuitive, with a mobile app (4.7/5 on iOS) that simplifies tasks like invoicing. MYOB’s cloud product (MYOB Business) is less streamlined, with a steeper learning curve.
• App Ecosystem: Xero’s 1,000+ app integrations, including Hubdoc and Stripe, outnumber MYOB’s smaller marketplace, offering more options for law firms (e.g., Clio integration) or retail businesses.
• Support Availability: Xero’s 46.7–53.3% market share (vs. MYOB’s 30–40%) means more accountants and bookkeepers are trained in Xero, especially in regional areas.
• Cloud Focus: Xero’s cloud-only model ensures seamless updates and accessibility, while MYOB’s hybrid desktop-cloud offerings can feel fragmented.

Disadvantages of Xero vs. MYOB

• Payroll Features: MYOB excels in complex payroll scenarios, like multi-award rates for retail or hospitality. Xero’s payroll is simpler, better for smaller teams, though integrations like KeyPay address this gap.
• Pricing: Xero’s plans start at ~$29/month (Ignite), while MYOB Essentials is slightly cheaper (~$27/month). Costs can rise with Xero add-ons, though its ecosystem often justifies the expense.
• Transition from Desktop: SMEs moving from MYOB AccountRight (desktop) may find Xero’s cloud-only approach unfamiliar, whereas MYOB offers continuity for desktop users.

Key Takeaway

Xero suits SMEs prioritising ease of use, integrations, and widespread support. MYOB is better for complex payroll needs or businesses tied to its desktop software, but its smaller ecosystem and user base limit flexibility compared to Xero.

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How Xero Supports Australian Law Firms

Consider a small law firm in Melbourne with 20 staff, managing client trust accounts and billing. Using Xero and its add-ons, the firm can:

• Connect to ANZ bank feeds for real-time visibility of trust account transactions, ensuring compliance with Law Society regulations.
• Use Actionstep (integrated via the Xero App Store) to sync client invoicing and time tracking, streamlining billing.
• Process expense receipts with Dext, photographing staff travel receipts and exporting them to Xero with automated coding.
• Manage payroll with Xero Payroll, ensuring accurate superannuation payments and ATO reporting for salaried staff and contractors.
• Send invoices with Stripe “Pay Now” links, enabling clients to pay retainers instantly, with automatic Xero reconciliation.
• Work with a Xero-certified bookkeeper to prepare accurate financial statements for quarterly BAS.
• Use Fathom to analyse practice area profitability (e.g., family law vs. commercial) and forecast revenue for strategic planning.

A less popular platform might lack these integrations or local expertise, requiring more manual work or custom solutions.

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Areas for Improvement

Xero has areas to address:

• Customer Support Variability: Some users report inconsistent customer support, with response times varying by issue or region, which can frustrate SMEs needing quick resolutions.
• Lack of Core Product Innovation: The core accounting product—general ledger, invoicing, and reporting—has seen little significant progress over the past decade. While stable, this stagnation may disappoint users seeking major updates to core functionality.
• Net Promoter Score (NPS): Xero’s FY24 Annual Report notes a below-target NPS for small businesses, suggesting user experience issues, possibly with support or feature limitations.

MYOB users also face challenges, such as a less modern interface (Capterra reviews). Xero’s large user base enables investment in improvements, but SMEs should consider these factors against their needs.

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Making the Right Choice for Your SME

Choosing accounting software involves balancing functionality with the benefits of a strong ecosystem. Xero’s 47–53% market share among SMEs (and 70–80% in cloud accounting) reflects its widespread adoption, offering:

• Access to a large pool of Xero-trained accountants and bookkeepers.
• Over 1,000 app integrations, including Xero Payroll, ApprovalMax, and Stripe, for customised solutions.
• Stable core features with emerging tools like AI analytics.

For Australian SMEs, especially law firms or service-based businesses, Xero’s ecosystem and support make it a practical choice. Visit xero.com for a free trial or contact a local Xero advisor to explore its fit for your business.