Wave’s developers like to tinker under the hood. The company occasionally rolls out a major feature update for its small business accounting service, but it’s always making smaller internal changes that can affect your daily accounting workflow for the better. Since we last reviewed Wave, the service has added new tools, such as improved reconciliation features, a revamped onboarding process, customer statements, and cash basis reporting, among many other things. H&R Block acquired Wave in July 2019.
Wave is priced for the freelance market, but small businesses with employees might also find it attractive. Three years ago, the service was our Editors’ Choice for sole proprietor accounting software, but this year the award goes to FreshBooks for its more-targeted set of tools, exceptional user experience, and terrific mobile app.
How Much Does Wave Cost?
Whereas other companies charge for their services—from $4.99 per month for GoDaddy Bookkeeping to $13.50 per month for FreshBooks, Wave’s primary accounting features are absolutely free. However, there are, of course, charges for payments and payroll. Credit card processing costs 2.9 percent plus 30 cents per transaction (3.4 percent plus 30 cents per transactions for American Express). Bank payments (ACH) are charged 1 percent ($1 minimum fee). Wave Payroll is available for a $35 per month base fee plus $6 per month for each employee or contractor. That’s a good selling point at any level of business, and it’s especially beneficial for freelancers and the like, for whom every dollar matters.
Great Setup Tools
When you sign up for a new Wave account, you see the site’s new onboarding process. You provide your name, business name, and industry, then choose which direction to go first in the setup process: invoicing, accounting, or payroll. I chose accounting. The next step in this multi-screen wizard asks several questions about your business. You supply your answers by selecting from drop-down lists and then move on to options that include connecting your bank, managing transactions, and defining sales tax. If you choose a step that requires additional prep work, you’re directed there. Once you’ve done all the required work in one area, you can click the Launchpad button to return to the initial setup options.
There’s one step here that I have mixed feelings about: Customize Accounts. Clicking this step takes you to your Chart of Accounts. You can see what accounts have already been set up in areas including assets, income, and expenses, and then add, edit, or archive accounts listed there. You, of course, have to create your bank and credit card accounts. There’s good online documentation for this whole process and it certainly doesn’t hurt to get a better understanding of this critical element of your accounting files. But modifying a Chart of Accounts is generally a task that is best done in consultation with an accountant. Competing sites allow you to do this, too, but they don’t consider it a step in the setup process.
You can also set up Wave by visiting the app’s toolbar and Settings menu, but you’re less likely to miss something important if you use the dedicated setup feature. The Settings menu is always available, so you can add and edit information here as you go along. But by at least browsing through Wave’s settings before you begin, you can learn more about the site’s capabilities, especially if you didn’t go through the whole setup process.
Connecting to your financial accounts is an especially important task since Wave is built on this exchange of data. The site does allow manual entry of transactions, but it’s nearly impossible to run your business this way because you can’t see when deposits and withdrawals have cleared until you get your monthly statement. You can download both business and personal transactions. There are categories labeled Personal Expense or Withdrawal and Deposit from Personal, so you can separate these transactions for bookkeeping purposes. The site refreshes your data every time you log in.
Smooth Operations
All online accounting services claim to be easy to use. Wave lives up to that claim. It’s one of the cleanest, most understandable business services I’ve seen and is easier to use than FreshBooks in some areas. Wave adheres to double-entry accounting standards, but it does the grunt work in the background. What you see is rarely confusing.
Wave’s user interface and navigation system are set up in a fashion similar to its competitors’. The main workspace sits in the right two-thirds of the screen. Ads that used to appear on the right side are now gone, which is another big improvement. Wave now makes its money by suggesting and selling related accounting services. The left vertical pane displays a series of tabs representing the application’s sections: Launchpad, Dashboard, Sales, Purchases, Accounting, Banking, Payroll, Reports, and Wave Advisors.
There’s also a link to Wave’s substantial library of integrations. Some are direct connections, like Google Sheets and Etsy. In addition, you can integrate Wave with the 1,500+ applications that Zapier supports. The Wave Advisors link is new since my last review. The company offers in-house accounting services: monthly bookkeeping and tax services, each of which starts at $129 per month, and accounting coaching for a one-time fee of $199.
Clicking on each section icon reveals a dedicated submenu for each one. Click Sales, for example, and you can click again to go immediately to screens such as Estimates, Invoices, Customer Statements, and Products & Services. Wave is not as good as FreshBooks at tucking away its features, but it also offers more of them. Every screen looks great and all are easy to understand. If you do have questions, though, Wave provides plenty of help. Its onsite guidance includes an excellent interactive support bot that lets you ask questions and helps you narrow down your queries. There’s also a lot of context-sensitive help. And you can email questions to the support team.
Good Dashboard, Minimal Records
The site’s simplicity begins with its dashboard. All of the online accounting services I’ve tested offer a dashboard that displays similar types of information, but Wave’s is the best I’ve come across for freelancers and sole proprietors.
The Cash Flow report appears at the top of the screen in graph form, followed by Profit & Loss. Below that is a list of outstanding invoices and bills—mini aging reports. You can click on any of them to view the underlying transactions. The Dashboard also displays account balances and income/expense numbers and charts, as well as links to common activities like adding customers and customizing your invoices.
Record templates for customers, vendors, and products and services are less detailed than those of some competitors. You can import customer and vendor data via CSV files or as Google Contacts, but otherwise, you have to enter each record manually. This doesn’t take long, since customer and vendor records only contain fields for extended contact information, though there are more, specialized fields if you designate someone as a 1099 contractor. Product and service records, too, are very basic. You can enter a name and description, price, and sales tax information. If you check boxes to indicate that you buy and/or sell an item, you have to specify an account number.
Wave’s Transaction Table
Wave manages to include everything you need to know about transactions on one page, located under the Accounting link. Most of this screen is taken up by a current list of the transactions you’ve imported from financial institutions (or added manually). This table’s columns display each transaction’s date, description (such as Taxi Receipt or Payment to Paper), amount, and category (which you can edit if Wave has incorrectly assigned a transaction or didn’t guess). To the right of each is a check mark, which you click to verify that the transaction is complete and correct.
When you create a transaction manually or edit one that’s been imported from your bank account, you can modify its details in a pane that appears on the right. If it’s an expense, for example, you can edit the description so it’s more understandable than what the bank submits. You can add a customer or vendor, add sales tax, split the transaction between categories, and duplicate or delete the transaction. You can also classify transfers, process refunds, and earmark sales tax refunds. Wave’s deep, flexible transaction management tools are unmatched by any other accounting tool aimed at freelancers. The site now has a traditional reconciliation tool that’s been enhanced for 2020, but freelancers may prefer to keep their accounts straight using the Transactions page alone.
What Features Is Wave Missing?
Wave lacks functionality in several areas, many of which wouldn’t be as useful to the freelance market as they would be to larger businesses. While you can create product and service records for use in sales and purchase forms, you can’t track inventory stock levels (more on this in a moment). Nor does Wave offer a dedicated time-tracking tool like FreshBooks does, which would be very helpful to sole proprietors and independent contractors. You can record blocks of time as products, but this isn’t a particularly elegant workaround.
Integrated payroll is available from Wave, but it’s not as accomplished as many competing standalone tools (which you can’t use with Wave). Most states are self-serve, meaning Wave calculates payroll taxes, but users must pay and file them themselves. If you live in one of the 14 full-service states, though, Wave can make your payments and file the required paperwork with state agencies and the IRS. These states are Arizona, California, Florida, Georgia, Illinois, Indiana, Minnesota, New York, North Carolina, Tennessee, Texas, Virginia, Washington, and Wisconsin. Wave Payroll is in compliance with COVID-19 regulations, meaning the company continues to update the site to incorporate government relief programs and changes.
Wave doesn’t provide any inventory management capabilities, though it does integrate with two solutions from other vendors through Zapier. It also lacks two built-in features offered by Intuit QuickBooks Self-Employed that would be especially helpful to independent contractors: the ability to estimate quarterly taxes and to record mileage as you drive by using a smartphone’s location services.
Invoicing and Billing
Wave handles invoicing capably. Creating an invoice is as easy as pulling down a list of customers, items, services, taxes, and the like, from the available fields. You can add new customers, items, and taxes on the fly if they haven’t already been defined. The ability to add discounts is coming soon. You create estimates using a similar process, though they require you to enter an expiration date; you can later convert expenses into invoices.
A Preview option lets you see what the invoice will look like before you actually save and send it. You can toggle between desktop and mobile device views, which is a nice touch that I didn’t find elsewhere. If your Wave account is connected to a payment processor, customers receive information on the invoice about how to pay via credit card or e-check. Completed invoices look great and are customizable. You can choose from three different templates and add a logo and accent color. Other options here include setting defaults (like payment terms, title, and footer), editing or hiding invoice columns, and scheduling reminders. You can also change settings for estimates on this same page.
Recurring Invoices have a separate link on the Sales menu and are just as easy to use. After you create the invoice, you save it and proceed to a second screen on which you can specify the invoice frequency. This can be daily, weekly, monthly, yearly, or some custom setting you define. You can also specify the customer’s time zone to ensure that the invoice is sent in the morning and isn’t as likely to get lost. On the next screen, you have the option of allowing customers to pre-authorize recurring credit card payments, which is an unusual feature.
When invoices have been sent, you can track the status (such as Unsent, Unpaid, Viewed, and Overdue) of each one. Wave allows you to see different views of your invoices by providing filters that include status, customer, and date range. It also displays three critical numbers at the top of the screen: dollar amounts for overdue invoices, those due within the next 30 days, and the average time to get paid. You can learn a lot about your accounts receivable from this page.
Wave introduced the ability to produce customer statements not too long ago, which was an important addition. You can create and send these to remind customers of past due payments or simply to provide them with a record of their account activity for their records. Unfortunately, you can only create statements for one customer at a time. QuickBooks Online offers more flexibility here.
Wave added a feature a couple of years ago called Instant Payouts. After you successfully record a payment from a customer using one of Wave’s payment-processing services, you click the Banking link and select Payouts. A list of recent payments appears, and a link in the upper right corner says, “Pay out now.” Click it, and you see what your payout would be after the one-percent fee is taken out. Once you approve the transaction, the payment will appear in the appropriate account, available for you to use (normally, these payments take two or more days). No other service I’ve reviewed handles expedited payments in quite this way.
You can record simple vendor bills and their payment in Wave, but this function isn’t as developed as invoices are. If some of your vendors are independent contractors, though, you can manage and pay them through Payroll By Wave, which helps you generate annual 1099 forms.
Limited Reports
As I said earlier, Wave offers customizable views within the Invoice screen that display, for example, a list of invoices for a specific customer or date range. The site also provides report templates that can be generated within the application and exported as CSV or PDF files. Beyond the standard financial reports required by double-entry accounting rules (Profit & Loss, Balance Sheet, and Cash Flow), there are also reports related to specific elements of the site, like Income by Customer, Aged Payables, Sales Tax, and Account Balances. This is a fairly slim set of reports for a double-entry accounting website. New, though, is cash basis reporting for relevant reports.
Wave’s Mobile Apps
Wave is quite a capable service, but its numerous features don’t translate to the mobile apps (iOS and Android) as a whole. There’s no comprehensive remote solution. Wave Invoicing, though, allows you to create invoices and accept payments. It displays lists of existing Unpaid, Draft, and All invoices. It also provides access to your customers and item records, as well as invoice customization and defaults. It’s a good-looking app, and easy to use. Icons at the bottom of the screen open individual sections.
A Solid Choice for Freelancers
Wave’s user experience and its smart choice of feature options should accommodate freelancers and sole proprietors who need an online accounting service and may want a little room to grow. No matter how often you use it, you don’t pay anything for the core accounting tools. But Wave’s lack of a dedicated time-tracking tool is an unfortunate deficit since there are many service-based freelancers in this gig economy.
If you don’t need time tracking or full mobile access, though, Wave is an excellent choice for the smallest of businesses. It simplifies double-entry accounting for non-accountants, but also provides the tools an accountant would need for advanced work. The Editors’ Choice winner for accounting for freelancers and sole proprietors this year goes to FreshBooks, though, a service with a user experience and targeted set of freelancer tools that can’t be beat. Our overall top pick for larger small businesses goes to Quickbooks Online, which offers an unbeatable combination of ease of use and powerful features.
While you’re working on getting a handle on your money, you should also check out our stories on the best payroll services and the best tax prep software.
