Xero Vs. Wave: Choosing the Right Accounting Software in 2023

Accounting is one of the backbones of any business and plays a key role in the success and growth of the business. In the dynamic realm of modern business, picking the right accounting software can be a pivotal moment for entrepreneurs and small business owners. It often comes down to a comparison between Xero vs. Wave.

As we step into 2023, this ongoing battle between two major players remains a hot topic. In this blog, we’re diving deep into the world of Xero and Wave, aiming to guide you through the intricacies of these platforms. We aim to empower you with the knowledge needed to make a well-informed decision that suits your financial needs perfectly.

Let us delve deeper into the key features, pricing, user reviews and integration of Xero vs Wave to help you decide which is the best suited for your business.

Deciding Factors

Many small businesses may struggle to manage their books without the expertise and know-how. This is where small business accounting software comes into the picture, allowing them to streamline their accounting and bookkeeping processes for smoother operations efficiently.

Xero and Wave are two of the most popular accounting software among small business owners, with many comparable features. However, each platform has its unique features, making it the ideal solution for different accounting needs.

While offering a rich array of accounting features, both Xero and Wave have differences that can serve unique business needs. However, the key deciding factors come down to the pricing structure, number of users, accessibility, specialized accounting features, and customer support.

Xero Vs. Wave: Features

Although they offer comparable accounting features, the features of Xero vs. Wave you need may vary depending on your business processes, systems, and needs. For example, Wave has great invoicing features, while Xero is superior when it comes to inventory management features.

Here’s how key features of Wave vs. Xero compare:

Invoicing

Both Wave and Xero have features to create, manage, and send invoices for free. However, Xero’s invoicing features are basic and customizing invoices or sending large quantities of invoices can be challenging. With Wave, on the other hand, you can easily create and customize professional-looking invoices – with your business logo – to share with your customers.

Subscriptions

Wave is the better alternative if recurring payments or subscriptions are a key part of your business plan. Wave’s subscription payment features are robust – with options for flexible scheduling, automatic receipts, custom messaging, and time zone controls. Although Xero has some features for accepting recurring payments, they are not as sophisticated.

Inventory

Xero outshines Wave when it comes to inventory tracking and management for businesses with 10,000 or fewer SKUs. Xero offers features to track the cost of goods, set up custom inventory reports, manage vendors, and track products to create purchase orders. Additionally, easy integrations with Amazon, Shopify, and Etsy make inventory management more robust. On the other hand, Wave is best suited for a service-based business with minimal inventory management support.

Sales Tax

Xero is also better for sales tax management, calculations, configuration, and reporting. It also has a user-friendly setup for DIY sales tax configuration and returns filing for someone without accounting expertise. Although Wave offers features to track and calculate sales tax, they are basic.

Reporting

Despite its limited reporting functionality, reporting with Xero is easier and more visually appealing. You can still view key financial reports like P&Ls, balance sheets, or inventory tracking. Reporting features in Wave is easy to use but lack in-depth analytics and insights when it comes to employee data, inventory, or sales tax. Although this can work well for freelancers, self-employed individuals, or small businesses with only a handful of employees, it will not meet the reporting needs of bigger businesses.

Payroll

Wave offers managed payroll solutions in California, Florida, New York, Texas, Illinois, and Washington to transfer tax payments and file necessary paperwork automatically. Outside of these states, you have the option to use the self-service payroll option, where you need to pay for and file the tax paperwork yourself. Xero does not have an in-house payroll solution. It integrates with Gusto (for additional fees) for all your payroll processing needs.

Although the features of Xero vs. Wave are comparable, Xero has a slight edge because of more sophisticated bookkeeping solutions. Its advanced inventory management, sales tax configuration, reporting, and payroll management features make it a more comprehensive bookkeeping solution for small businesses.

Xero Vs. Wave: Pricing

Wave is a free-to-use platform for all its basic functions, including accounting, invoicing, and receipts. It charges processing fees of 2.9% + $0.30 per credit card and 1% per bank transaction. Wave’s monthly payroll services start at $35 per month + $ per employee (or independent contractor) for tax service states and $20 per month + $4 per employee (or independent contractor) for self-service states.

Xero offers three pricing plans:

• Early: $13 per month; send up to five invoices and quotes; enter up to five bills; reconcile up to 20 bank transactions
• Growing: $37 per month; send unlimited invoices and quotes; enter unlimited bills; reconcile unlimited bank transactions
• Established: $70 per month; send unlimited invoices and quotes; enter unlimited bills; reconcile unlimited bank transactions; multi-currency support; claim capture and management features; project time and cost tracking features

Comparing the pricing plans, Wave is a more affordable option for freelancers or small businesses with smaller teams (with just a few employees). But you should invest in Xero to access advanced accounting features.

User Reviews

Xero and Wave are two of the most popular and highly-rated accounting software for small businesses.

Users are happy with Xero’s simple and intuitive interface, which is easy to set up and use. Its fixed asset management and project accounting capabilities are also popular among users. However, the lack of live customer support and the need for live bank feeds to reconcile transactions are some of its most significant limitations.

On the other hand, Wave users are happy with the easy-to-use free solution that has all the features to streamline accounting and bookkeeping for a small business. Customers also appreciate Wave’s accessible features, allowing them to send invoices remotely.  But the lack of live phone support is one of its biggest drawbacks.

Here are the average scores of Xero and Wave on popular review sites:

Integrations

Third-party integrations ensure your accounting software can work seamlessly with all the other business management tools you may be using and ensure overall performance efficiency.

Xero is the clear winner for third-party integrations, with the Xero App Store giving you access to numerous third-party apps that integrate seamlessly with Xero. This includes popular apps like PayPal, Gusto, Stripe, HubSpot CRM, DEAR Inventory, Hubdoc, and Mailchimp.

On the other hand, Wave requires you to subscribe to Zapier and create Zaps for every individual app you want to integrate, severely limiting its third-party integration capabilities.

Which Is Best for My Business Needs?

Conducting your due diligence and comparing your needs, expectations, and budget with key features and the pricing structure of accounting software are crucial. If you are a small business owner (with a 2 or 3-person team), a freelancer, or a self-employed individual with basic bookkeeping needs, Wave is the best and most affordable option. However, if you are an e-commerce or product-based business that needs advanced inventory and project-tracking features, you should invest in Xero.

Our Final Verdict

Comparing Xero and Wave’s features, prices, and integration options, the recommendation to choose one over the other will depend solely on your business needs. Xero is the better option for product-based or e-commerce small businesses. It can meet their need to manage their inventory and projects along with a comprehensive suite of bookkeeping and reporting features. On the other hand, Wave is the better option for service-based freelancers and small businesses that only need basic accounting functions at affordable rates.

Frequently Asked Questions