Xero has grown from a New Zealand-based startup into one of the most popular cloud accounting platforms in the world. Especially for online sellers, remote-first teams, and digital service providers, Xero presents a flexible, scalable accounting solution that integrates seamlessly with thousands of apps and platforms. But how well does it serve the specific needs of EU-based entrepreneurs, particularly those with cross-border VAT obligations, monthly declarations, or complex reporting standards like EÜR or Bilanz?
Let’s explore Xero in-depth – what it does well, where it falls short, and how it fits into the modern international tax and accounting landscape.
1. What Is Xero?
Xero is a fully cloud-based accounting platform designed for small to mid-sized businesses. It offers tools for invoicing, expense tracking, bank reconciliation, payroll (in select countries), reporting, and multi-currency support. Unlike many traditional bookkeeping tools, Xero emphasizes automation, collaboration, and customization.
With over 3 million users globally, Xero is especially popular among:
- SaaS companies and agencies
- E-commerce sellers
- Digital freelancers and remote-first teams
- Multi-entity businesses operating in several jurisdictions
2. Core Features That Matter to Global and EU-Based Businesses
✅ Bank Feeds & Smart Reconciliation
- Connect your Xero account to thousands of global banks.
- Apply automatic rules and manual suggestions for consistent bookkeeping.
- Categorize transactions with smart logic, including PayPal and Stripe.
✅ Multi-Currency
- Handle invoices, bills, and accounts in over 160 currencies.
- Automatic daily exchange rates.
- Ideal for businesses billing or sourcing internationally.
✅ Invoicing & Quotes
- Beautiful branded templates.
- Custom payment terms.
- Stripe integration for instant credit card payments.
✅ Inventory & Product Management
- Track quantities and average cost.
- Manage digital and physical stock.
- Perfect for small merchants or resellers.
✅ Automation Workflows
- Use Xero rules, scheduled recurring invoices, and third-party apps to reduce manual entry.
- Integration with tools like Zapier, Make (Integromat), or e-commerce platforms like Shopify, WooCommerce, and Amazon.
3. VAT in Xero: What Works and What Needs Customization
This is where many EU-based businesses begin to ask more nuanced questions.
🌍 Xero Is Not EU-Centric by Default
Xero was built for global use, especially in Anglo-Saxon systems (UK, Australia, New Zealand, US). For EU-specific rules (like reverse charge, innergemeinschaftliche Lieferung, or §25a Differenzbesteuerung), Xero does not offer built-in compliance features out of the box.
Instead, it allows flexibility to:
- Create custom VAT rates for reverse charge or export logic.
- Manually adjust EC Sales Lists (ZM) or intra-EU supplies.
- Generate custom reports to extract VAT totals – for use with ELSTER or your tax consultant.
This flexibility is powerful, but requires expert setup and ongoing configuration. FASETA supports clients here by preparing custom Xero tax configurations matched to their country, business model, and legal obligations.
5. App Integrations: Where Xero Truly Shines
Xero has one of the most robust app ecosystems of any accounting platform. This allows global businesses to create modular finance stacks using tools like:
- A2X – For e-commerce reconciliation (Amazon, eBay, Shopify)
- Dext / Hubdoc – For automated receipt and invoice capture
- Make.com (Integromat) – For advanced workflows between CRM, email, and accounting
- FASETA API – For monthly VAT exports, filings, and ledger preparation
Especially if you operate a multi-market Amazon business, Xero + A2X + FASETA = the most automated compliance setup available.
6. Reporting & Growth-Ready Insights
- Customizable P&L, Balance Sheet, aged receivables/payables.
- KPI dashboards with real-time cash flow.
- Partner integrations for BWA-style reporting.
While Xero doesn’t natively support German BWA exports or E-Bilanz XML formats, FASETA prepares these via structured data exports and alignment with DATEV-compatible formats.
7. FASETA Services + Xero: A Perfect Match
At FASETA, we specialize in supporting EU-based businesses using Xero, by:
- Creating VAT-compliant chart of accounts and tax codes
- Generating monthly UStVA, ZM and annual EÜR/Bilanz from Xero data
- Matching Xero reports with your country-specific filing obligations
- Managing differenzbesteuerte Umsätze, OSS, and intra-community flows
We don’t just help you use Xero – we make Xero legally and tax-wise fit for Germany and the EU.
Is Xero the Right Choice for You?
Xero is one of the most modern, customizable, and integration-friendly cloud accounting platforms available. It’s perfect for businesses that want to:
- Operate across borders with multi-currency billing
- Integrate with e-commerce platforms
- Automate receipts, reconciliations, and reporting
- Customize their VAT workflows – with expert help
But it’s not plug-and-play for Germany or the EU. If you’re running a VAT-registered entity, handling intra-EU supplies, or subject to complex reporting rules, Xero is a powerful engine – but needs professional guidance to be legally compliant.
8. Xero and the Balance Sheet: Functionality, Strength, and Global Use
Full Double-Entry Bookkeeping with Real-Time Balance Sheet
Xero is built on a true double-entry accounting system, meaning every transaction affects at least two accounts and directly updates your Balance Sheet and Profit & Loss (P&L) in real-time.
✔️ What That Means Practically:
- Assets, Liabilities, and Equity are always up to date.
- You can track:
- Cash on hand
- Accounts receivable / payable
- Inventory
- Loans / liabilities
- Owner’s equity or retained earnings
- Drill-down available: Click into any Balance Sheet line to see full transaction history.
- Built-in reporting allows monthly comparisons, previous year comparisons, and custom date ranges.
9. Balance Sheet Use in Other Jurisdictions
🇩🇪 Germany / Austria / EU (with Bilanzpflicht)
- Xero can produce full Balance Sheets, but it doesn’t map to DATEV or E-Bilanz XML out of the box.
- FASETA helps clients generate:
- Structured Balance Sheets compliant with § 266 HGB
- Manual or API-based DATEV exports
- Mappings to standard SKR04/SKR03 charts of accounts.
- ✅ Great for Bilanzierungspflichtige Unternehmen, even with:
- Fixed assets (Anlagevermögen)
- Depreciation schedules
- Intercompany loans
Example:
An Austrian GmbH uses Xero + Hubdoc. All vendor invoices are digitized, booked to liabilities. The fixed assets are created in Xero, depreciation rules are set, and the balance sheet accurately reflects Abschreibungen and Eigenkapital. FASETA processes the E-Bilanz and UStVA.
🇺🇸 United States
- Xero complies with GAAP (Generally Accepted Accounting Principles), with:
- Full chart of accounts
- Depreciation tracking
- Accrual and cash basis reporting
- Allows CPA review and export to TurboTax, QuickBooks Desktop, or PDF for audits.
Example:
A Delaware C-Corp books Stripe revenue and Amazon FBA purchases in Xero. Assets include prepaid subscriptions and software licenses. Liabilities reflect deferred revenue. Their CPA uses the Xero balance sheet directly to prepare the tax return (Form 1120).
🇬🇧 United Kingdom
- Xero originated in a UK-friendly structure and is natively compatible with MTD (Making Tax Digital).
- UK businesses can:
- Produce HMRC-compliant balance sheets
- Track capital allowances and depreciation
- Align with FRS 102 / FRS 105
Example:
A UK LTD bills clients in GBP, EUR, and USD. Xero handles currency revaluations monthly. The balance sheet shows multicurrency cash, outstanding VAT liability, and director’s loan. Final annual accounts are exported in iXBRL or submitted via a partner app.
10. Practical Features for Balance Sheet Management
| Feature | Functionality in Xero |
|---|---|
| 📊 Balance Sheet Report | Customizable, live data, multi-date comparison |
| 🧮 Fixed Asset Register | Add assets, schedule depreciation, automate monthly entries |
| 💱 Multi-currency Valuation | Revalue foreign balances automatically (e.g., PayPal, USD accounts) |
| 📁 Journal Entries | Manual journal support for accruals, corrections, and provisions |
| 🔧 Adjustments | End-of-year adjusting entries for tax accountants |
| 🧾 Export | PDF, Excel, or API (e.g., Make.com, FASETA toolchain) |
11. Integrations That Extend Balance Sheet Accuracy
- A2X: Automatically reconciles Amazon or Shopify sales into asset/liability accounts.
- Hubdoc / Dext: Digitize invoices and receipts directly into accounts payable / assets.
- FASETA API: Generates reports structured for German Bilanz, EÜR or BWA reporting.
12. Xero = Practical and Audit-Ready
Xero’s balance sheet isn’t just a summary report — it’s transactionally linked, reconciliation-capable, and auditable. This means:
- Every balance reflects real-world transactions.
- You can explain every movement to auditors or tax authorities.
- Monthly VAT declarations or end-of-year reviews are supported by drillable, structured data.
✅ Summary: Why Xero Is Practical for Real-World Balance Sheets
| Country | Xero Use Case | Adaptation Needed | Fit for Compliance |
|---|---|---|---|
| 🇩🇪 Germany | Bilanz, UStVA, ZM | FASETA mapping, export | ✅ With support |
| 🇦🇹 Austria | Bilanz, UVA | Custom tax codes, E1 mapping | ✅ With support |
| 🇺🇸 USA | GAAP-based reports | Minimal | ✅ Native support |
| 🇬🇧 UK | FRS102/105, MTD | None | ✅ Native support |
FASETA + Xero: Accounting That Fits Europe
At FASETA, we help EU-based businesses unlock the full potential of Xero — not just as a bookkeeping tool, but as a tax-compliant accounting solution.
Our services include:
- Designing VAT-compliant chart of accounts and tax codes tailored to your country
- Generating monthly UStVA, Zusammenfassende Meldung (ZM) and annual EÜR or Bilanz directly from Xero data
- Aligning Xero reports with local tax and reporting standards
- Supporting Differenzbesteuerung (§25 UStG), OSS, and innergemeinschaftliche Lieferungen
With FASETA Services, Xero becomes more than software — it becomes fully aligned with EU accounting and tax law.
