A review of Wave Accounting by a small business owner/CPA
Wave accounting is a free accounting system for very small businesses. My wife and I run three small businesses: a rental house, a small service business my wife runs, and this website. We use Wave to track the income and expenses of all these businesses so that we can properly report our income on our tax return.
Although it may not be as complete a solution as competitors such as Quickbooks, there is enough to like about Wave that I will continue to use it for all my businesses. Here is a run down of the things I like, and the things I don’t like about Wave.
Things I like
The cost of Wave is my favorite word in the English language: free! There is no charge for using Wave as it is supported by Ads. I find the ads to be very unobtrusive.ll find on Wave are less obtrusive than you will find here on the ABC, so I have no right to complain.
When you compare that to Quickbooks, the biggest name in small business accounting software, that is a hell of a deal. Although prices can vary, at the time I wrote this article QuickBooks Online costs $50 for a year of service and QuickBooks Pro 2014 costs $175. Another thing to keep in mind about Quickbooks is in order to keep you buying new software every couple of years they come out with a new version every year and only support a version for 3 years. So you’ll be shelling out another $175 before you know it.
Wave is cloud based software which basically means that the software that runs it isn’t on your computer, but is kept on Wave’s servers. You access Wave through your internet browser. Cloud based computing has been a trend in the business world the last several years and it has several advantages.
First of all, you can access it from anywhere you have an internet connection. If you can pull up a browser, you can pull up your accounting software.
The second advantage is that you don’t have to worry about backups. If your computer crashes, you don’t have to worry about how to restore accounting software, because it will be right there waiting for you when you can get the internet up and running again. If your business has a fire, you will have a ton of things you need to get up and working again, but Wave won’t be one of them.
The final advantage to wave based accounting is easy collaboration. If the software was just on my home computer and my wife wanted my help she would have to wait until I got home to take a look. Because Wave is cloud based we can both log on and see what is going on. If you have a tax accountant that helps you out with your accounting you can get them their own sign on to access without having to worry about sending files back and forth
This is a picture of my wife. Not to stereotype or anything, but she knows exactly as much about accounting as you would expect someone with blue hair to know. Although she has been married to a CPA for several years, the only thing she knows about my job is that I go to an office building every day. Wave is so simple even she can use it for the small service business she runs.
There are several ways to enter transactions into Wave. The simplest is to link your business bank account (you should have a business bank account) or credit card and have all the transactions automatically pulled into Wave. When Wave pulls the transactions in, it takes its best guess what they are for to get them into the correct GL accounts. It is only OK at guessing which accounts your payments should go to however, so it is necessary to run through them and edit the payments to make sure they are going to the right place. Anyone who regularly uses Mint.com for budgeting will be familiar with this process.
If your small business is selling stuff on Etsy or Ebay, the entering transactions will be especially easy for you as Wave integrates with the Etsy and Paypal software to automatically record all your sales.
Preparing invoices is simple. Just enter your customers information one time, and from then on you can create a new invoice in seconds. Invoices can be customized to look like you want them to look, and can include your logo if you like. They can be emailed to your customer with the push of a button, or print and mail them if you prefer.
To make things really easy on your customers then you can accept credit cards right through Wave. Your customers electronic invoices will include a link to pay their bill by a credit card. After they have made a payment Wave will charge you a fee of $0.30 per transaction plus 2.9% of the payment and deposit the rest into your account. Accepting credit cards is optional. If you choose to accept payments outside of Wave then matching payments up to the proper invoice to show that your customers have paid is simple.
Entering bills is just as easy as entering invoices. When you receive an invoice you must pay type the information into Wave in a few seconds. You can then review reports of all the bills you pay. Unlike Quickbooks, you can’t print checks straight from Wave to pay your bills. However, if the transaction runs through a linked checking account, it is easy to assign the payment to the bill to remove it from your accounts payable system. If you don’t pay through a linked account then entering a manual transaction is a breeze.
Wave will generate just about any report you want to see. Income Statements, Balance Sheets, customer reports, and vendor reports are all available. If there is a report that Wave doesn’t have, then the information can be exported to excel so you can create any report you want.
I appreciate being able to export information into excel because most software companies don’t allow you to do this, which is a big pet peeve of mine. Most software companies want to own your information, and only present it how they want you to see it, not how you want to see it. By letting customers put information into excel so it can be manipulated however you want Wave is allowing you to own the information.
You can pay extra for live support, but I don’t really think this is necessary. The free support is done by email. I emailed Wave a couple of questions when researching this article and was impressed by their customer service. You won’t find low quality answers from auto responders that don’t really address your question here.
Although it took a day or two to get back to me, they’re responses were from a live person who had obviously read my email, understood my question, and then emailed me back helpful responses that actually answered the questions I asked. Consider me a fan of Wave’s customer service department.
Things I don’t like about Wave
Although Wave works great for me, it isn’t the right solution for all small businesses. There are a number of things it doesn’t really do very well that will send some small business owners to Quickbooks. Here are a couple of things I don’t like.
No recurring transactions
Some transactions are the same month after month after month. It would be nice if you could set up an adjusting entry to run month after month, but that just isn’t possible. If you don’t know what a cash basis of accounting or accrual basis of accounting means, this probably isn’t important to you, so you can just skip to the next section.
If you run your small business on the cash basis of accounting this won’t be a big deal. I use the cash basis of accounting for my businesses, except that I want to recognize depreciation the same as it appears on my tax return. I can’t set up a recurring transactions to enter depreciation automatically so I get around this by entering my depreciation entries for the year all at once with 12 separate transactions each dated for a different month in the next year.
If you wanted to use the accrual basis of accounting with prepaid expenses and accrued liabilities then this would be a little more annoying as it would have to be done manually every month. Wave has told me that recurring entries is a feature they are working on in a future update.
No fixed assets
Although it is possible to manually track fixed assets in Wave, it is not as automated as I would like. It would be great if you could enter information into a fixed asset system which would then calculate and record deprecation for you.
Unfortunately, this doesn’t exist in Wave. Wave’s help section does have this guide on manually tracking fixed assets.
****Update***** If your business uses a lot of inventory please see Lance’s advice in the comments section below. He gives some great tips on how to make inventory work with Wave.
This is the area where QuickBooks Pro 2014 is the much better product. If you have small amounts simple inventory items that can easily be tracked manually, then you can follow Wave’s guide to manually tracking inventory. If you have larger amounts of inventory that are difficult to keep track of or calculate the cost of, then you might find Quickbooks to be a better choice for you.
As regular readers of the ABC know, I only write reviews of products I use on a regular basis and am familiar with. Wave has a couple of paid features which I don’t use, so I don’t really have an opinion on them. I will mention them here though since you might be interested in them.
If you have employees, then Wave can make payroll easy for you. There is a base fee of $5 plus an additional per employee fee of $4 for the first 10 employees and $1 per employee after the first 10. Wave will handle paying employees, getting the correct information filed, and getting your payroll taxes paid.
Credit Card Processing
As discussed above, Wave gives you the option of letting your customer’s pay by credit card through a link in the invoice you send them. You could probably find a lower fee somewhere else, but Wave’s fee isn’t completely unreasonable and it would sure be convenient for both you and your customers. If I start selling ads directly on the ABC I will consider this.
You can email your questions to Wave for free and they will get back to you within a couple of days. If that isn’t good enough then you can pay for live support. I find that the free email support is pretty good.
Note: I was not compensated by Wave in any way for this review, not even with a free T-Shirt. They do allow me to use their product for free. They let everybody use their product for free though.
Photo by Stirling Noyes