Xero vs FreshBooks for Canadian Small Businesses: An Honest CPA Comparison (2026)

We use both Xero and FreshBooks with clients at LedgerLogic, and the honest answer is that both are competent cloud accounting platforms for Canadian businesses. But they are built for different people, and choosing the wrong one costs you time every single month.

Most comparison articles are written by software review sites that have never reconciled a bank feed or filed a GST/HST return. This one is written by a CPA who works inside both platforms daily. Here is what actually matters when you are deciding between Xero vs FreshBooks for a Canadian small business.

The Short Answer: Who Should Use Which

If you want the recommendation before the reasoning:

Choose Xero if: You have (or plan to hire) a bookkeeper or CPA, you run an e-commerce business, you need multi-currency support, you have more than one person who needs access to your books, or you want the strongest GST/HST reporting available. Xero is the better long-term foundation for a growing Canadian business.

Choose FreshBooks if: You are a solo freelancer, consultant, or creative professional, your main need is sending invoices and tracking time, you want the simplest possible interface and do not care about double-entry accounting, or you run a service business with fewer than 50 transactions per month.

Now here is the detail behind that recommendation.

Pricing Comparison in CAD (2026)

Pricing is the first question everyone asks, but the sticker price is misleading. What matters is total monthly cost once you add users, features, and the integrations you actually need.

All prices in CAD, excluding GST/HST. Both platforms offer 30-day free trials and promotional discounts for new subscribers.

The critical line in that table is additional users. If you need your bookkeeper, your business partner, and your CPA to access your file — that is three users. On Xero, the cost is $0 extra. On FreshBooks, that is $33/month on top of your plan. For a business with a team, Xero's total cost of ownership is almost always lower despite the higher base price.

Feature-by-Feature Comparison

The scorecard is FreshBooks 5, Xero 7. But raw feature count is not the point. The question is which features matter for your business.

GST/HST and Canadian Tax Compliance: The Difference That Matters Most

This is the section most comparison articles skip, and it is the one that matters most for Canadian businesses.

Xero was built with multi-jurisdictional tax in mind. It handles GST, HST, and PST as separate tax components, lets you set up multiple tax rates per province, and generates a GST/HST return report that maps directly to the CRA filing. When you run the tax summary in Xero, you can see exactly how much GST/HST you collected at each rate, how much you paid on expenses (input tax credits), and what you owe — all broken down by tax period. For the full setup process, see our guide on configuring GST/HST in Xero.

FreshBooks handles GST/HST at a basic level — you can apply tax rates to invoices and track tax collected. But the reporting is less granular. If you sell to customers in multiple provinces (which almost every e-commerce business does), FreshBooks does not break down tax collected by provincial rate in the same detail that Xero does. This means more manual work at filing time, or more hours (and cost) from your accountant to sort it out.

A concrete example: one client came to us from FreshBooks after receiving a $3,800 GST/HST reassessment from the CRA. They had been collecting HST at 13% on all invoices, including those to clients in Alberta (which should have been 5% GST only). The FreshBooks setup made it easy to apply a single tax rate but did not surface the error. In Xero, multi-rate tax is the default workflow — you set the customer's province, and the correct rate applies automatically. It is a small configuration difference that prevented expensive mistakes.

For a solo consultant in Ontario who only invoices Ontario clients, this difference is negligible — you have one HST rate and both platforms handle it fine. But the moment you sell across provincial lines, Xero's tax handling becomes a meaningful advantage.

Who Should Choose FreshBooks

FreshBooks is genuinely the better choice for a specific type of Canadian business. If you match this profile, do not let anyone talk you into Xero — you will be paying for complexity you do not need.

Solo freelancers and consultants. If your accounting needs are "send invoices, track expenses, file taxes once a year," FreshBooks is purpose-built for you. The interface is cleaner, the mobile app is better, and you will not need to learn double-entry accounting concepts to use it.

Service businesses that bill by the hour. FreshBooks has built-in time tracking and project profitability tools that Xero simply does not match. If you bill clients by the hour — lawyers, designers, developers, marketing consultants — FreshBooks connects time tracking directly to invoicing in a way that saves real time.

Businesses with minimal transactions. If you have fewer than 30-50 transactions per month and no inventory, FreshBooks Lite or Plus handles everything you need at a lower total cost (since you likely only need one user).

People who want phone support. Xero does not offer phone support in Canada. If being able to call someone when something is wrong matters to you, FreshBooks (a Toronto-based company) provides that.

Who Should Choose Xero

Xero is the platform we recommend to the majority of our Canadian clients, and it is the one we prefer to work in as CPAs. Here is why.

Any business with a bookkeeper, accountant, or CPA. If a professional manages your books — or if you plan to hire one as you grow — Xero is the clear choice. The advisor tools, practice manager integration, and unlimited user seats mean your accountant can work in your file without costing you extra. Most Canadian CPAs and bookkeepers prefer Xero or QuickBooks Online; very few are set up for FreshBooks.

E-commerce businesses. If you sell on Shopify, Amazon, or WooCommerce, Xero paired with A2X is the gold standard for e-commerce accounting in Canada. FreshBooks does not have an equivalent integration for breaking down marketplace payouts.

Businesses selling across provinces. The multi-rate GST/HST handling and provincial tax reporting in Xero is materially better than FreshBooks for any business that invoices or sells to customers in more than one province.

Growing teams. The unlimited users policy is not a minor perk. A business with a founder, a part-time bookkeeper, and a CPA saves $22/month on FreshBooks user fees — and that gap widens as you add employees who need expense submission access. Over a year, that is $264+ in savings just on user seats.

Businesses needing strong reporting. Xero offers 80+ reports, tracking categories for department or project-level reporting, and a custom report builder. If you need to generate a Profit and Loss by location, or track expenses by project, Xero handles this natively. FreshBooks reporting is limited to the basics. For more detail, see our guide on setting up your Xero chart of accounts to get the most from your reports.

Multi-currency businesses. If you invoice in USD and CAD (common for Canadian businesses with US clients), Xero Premium handles multi-currency natively with automatic exchange rate updates from the Bank of Canada. FreshBooks only supports multi-currency on its Select plan, which requires custom pricing. For a business that regularly deals in two currencies, this is a significant workflow difference.

What About QuickBooks Online?

The elephant in the room. QuickBooks Online is the most popular accounting software in Canada, and for good reason — it has the largest app marketplace, the most accountants trained on it, and strong GST/HST handling.

We have a detailed Xero vs QuickBooks comparison if you are deciding between those two. The short version: QuickBooks Online is a solid choice for most Canadian businesses. We recommend Xero over QBO primarily because of the unlimited users, the cleaner bank reconciliation workflow, and the stronger e-commerce integration stack. But if your accountant already uses QuickBooks and you are not doing e-commerce, QBO is perfectly fine.

FreshBooks vs QuickBooks is a bigger gap than FreshBooks vs Xero. QBO has double-entry accounting, robust reporting, and full accountant collaboration tools — FreshBooks does not match it on any of those.

The Hidden Cost of Choosing Wrong

The real expense is not the monthly subscription — it is the switching cost if you pick the wrong platform and need to migrate later.

We have migrated dozens of clients from FreshBooks to Xero. The typical scenario: a freelancer starts on FreshBooks because it is simple, grows to 5-10 employees, and suddenly needs proper bank reconciliation, multi-user access, and CPA-grade reporting. The migration takes 4-8 hours of accounting time, costs $500-$1,500 depending on data complexity, and always loses some historical context in the transition.

The most common trigger we see is when a business owner hires their first bookkeeper or engages a CPA for the first time. The bookkeeper opens the FreshBooks file, realizes there is no proper chart of accounts structure, no bank reconciliation history, and limited reporting — and recommends switching to Xero or QuickBooks Online. At that point the business has 1-3 years of FreshBooks data that needs to be either migrated or reconstructed. The earlier you make the right choice, the less that migration costs later.

If you are a solo freelancer with no plans to grow beyond yourself, FreshBooks is the right call. But if there is any chance you will hire employees, bring on a bookkeeper, or expand into e-commerce within the next 2-3 years, starting on Xero avoids a painful and expensive migration later.

For context on what Xero will cost as you grow, see our full Xero pricing breakdown for Canadian businesses.

Our Verdict

For the majority of Canadian small businesses, Xero Standard at $55/month is the better long-term choice. The unlimited users alone justify the price difference over FreshBooks for any business that works with an accountant. The GST/HST reporting is more reliable, the app ecosystem is five times larger, and the bank reconciliation tools are built for the volume that growing businesses generate.

FreshBooks remains the right answer for solo freelancers, hourly-billing consultants, and anyone who genuinely wants the simplest possible accounting tool and does not need CPA collaboration. It is also a Toronto-based Canadian company, which matters to some business owners.

If you are unsure which fits your situation, we are happy to discuss it. A 15-minute call with our team can save you months of frustration on the wrong platform.

Frequently Asked Questions

Is Xero or FreshBooks better for Canadian businesses?

For most Canadian businesses, Xero is the stronger choice because of its unlimited users, superior GST/HST handling across provinces, and deeper reporting. FreshBooks is better for solo freelancers and consultants who primarily need invoicing and time tracking with a simple interface.

Which is cheaper, Xero or FreshBooks?

FreshBooks Lite starts at $19/month vs Xero Starter at $25/month, so entry pricing is nearly identical. However, FreshBooks charges $11/month per additional user while Xero includes unlimited users on all plans. For any business with 2+ people needing access, Xero is cheaper overall.

Does FreshBooks handle GST/HST properly?

FreshBooks can apply GST/HST to invoices and track tax collected. However, its tax reporting is less granular than Xero — it does not break down tax collected by provincial rate in the same detail, which creates more manual work when filing your GST/HST return, especially if you sell to customers in multiple provinces.

Can I switch from FreshBooks to Xero?

Yes, but it requires migrating your data. Xero has a FreshBooks import tool for contacts and invoices. Chart of accounts, bank transactions, and historical reports need to be migrated manually or by an accountant. Typical migration takes 4-8 hours and costs $500-$1,500 depending on data volume and complexity.

Does FreshBooks have payroll in Canada?

No. FreshBooks does not offer built-in payroll for Canadian businesses. You would need a separate payroll provider like Wagepoint or Humi. Xero also does not have full native Canadian payroll — it integrates with third-party providers like Wagepoint. Neither platform has a clear advantage on payroll.

Is FreshBooks good for e-commerce?

FreshBooks is not ideal for e-commerce. It lacks the deep integrations with platforms like Shopify and Amazon that Xero offers through A2X and Synder. If you sell products online, Xero is the significantly better choice for handling marketplace payouts, multi-province tax, and inventory tracking.

Does Xero have phone support in Canada?

No. Xero offers email and online chat support only. FreshBooks, which is headquartered in Toronto, does offer phone support. If phone support is important to you, this is a genuine FreshBooks advantage.

Which accounting software do Canadian CPAs prefer?

Most Canadian CPAs work primarily in Xero or QuickBooks Online. Very few accounting firms are set up to work in FreshBooks because it lacks the advisor tools, practice manager integration, and double-entry accounting depth that CPAs need. If you plan to work with a CPA, choosing Xero or QBO will give you a much wider selection of professionals.