Initial Review of Xero Personal

I’ve been eagerly looking forward to the release of Xero Personal which has been heavily promoted by Xero and BNZ (as MoneyMap) for the last few months. Unfortunately my first impressions of the product today are extremely underwhelming. Xero Personal is definitely not worth anywhere close to $5/month for me at this point in time and I’m unlikely to even keep using the free trial.

To set the context for that statement, Xero Business set the bar high. I first used the original version of Xero while it was still in beta and even then it was clear that it was an application that took accounting to a new level and would provide an order of magnitude improvement in how I maintained the accounts for our business. That promise held true once we started paying for it, even though the cost of Xero is more than 10% of our annual expenses, the time and hassle it saves makes it a worthwhile investment. By contrast today’s release of Xero Personal offers nothing new above existing personal finance websites or desktop packages and would take me extra time to use as it fails to handle many of the basic transactions that a normal household will encounter.

The way Xero Personal works is by having you manually upload your bank statements (the automatic import functionality that is so useful in the business version of Xero has been restricted to BNZ MoneyMap customers only). For each transaction you are asked to provide two pieces of information. The first is a category which serves as a basic form of account to track expenses and income. For each category you can set a spending or saving goal which Xero will help you track progress towards. The second is a name to identify the other party in the transaction. Xero Personal comes pre-loaded with some fairly generic categories. Annoyingly you’re restricted to no more than 8 additional custom categories and the names associated with each transaction are are simple strings – you can’t link a transaction to another account or entity. To represent a transfer you need two separate transactions, one in each account, which you assign to the special category “Transfer” so that Xero knows to essentially ignore it. Nothing links the transactions together or ensures that the values balance.

In addition to the basic categorisation functionality the application also attempts to track your assets and liabilities (bank accounts and credit cards show up automatically) so that it can compute your net worth. Unfortunately as soon as you try and use this you hit the problem that there is no way to link transactions from your accounts back to your assets and liabilities. This means unless you regularly and manually update your assets and liabilities the “net worth” calculation only takes into account changes in your cash position and becomes blatantly incorrect.

As an example, take the common case of a household with a weekly mortgage (or other loan) repayment. You want the weekly payment to decrease the balance of your current account, increase the balance of your interest expense category and decrease the value of your mortgage liability. Your net worth should decrease by the value of the interest expense only, as the decrease in the value your mortgage liability offsets the remainder of the decrease in the value of your current account.

Xero Personal doesn’t come close to being able to handle this example today. The ability to split payments to different categories has also been left out (even though it’s present in Xero Business and therefore presumably in the underlying engine) so your only option is to categorise the entire payment as a mortgage or housing expense, decreasing your net worth by the full value of the payment. Even if you could split the payment between two categories, one for the interest and one for the principal the inability to link the category for the principal to the liability account means the net worth calculation will still be incorrect.

Maybe I’m being to hard on this newly released product? It is a SaaS application after all and Xero has an excellent history of releasing regular updates to the business version of Xero. The reason I’m so surprised and disappointed by this initial release is that it essentially lacks any double-entry accounting support – many of the missing features are core functionality that is already implemented in the accounting platform that supports the business version. Assuming that Xero Personal is built on the same platform (and that would be the obvious choice wouldn’t it?) the fact that Xero Personal has been released and is being heavily promoted without these features (compared to the initial version of Xero Business which was fully functional and obviously awesome even in beta) suggests to me that it’s a conscious decision to significantly limit the scope and usefulness of the application rather than simply a limit on what could be implemented before the initial release.

I sincerely hope that I’m wrong and that the coming months bring significant improvements to the functionality of Xero Personal, but until it can support common transactions like mortgage repayments correctly I won’t be using it or recommending it to anyone.