Free can be an attractive word when you are on the receiving end. Of course, certain free offerings, can make you think twice. Here, I’ll review the free Wave Accounting Software to help you decide if it is right for your business.
The Wave Accounting software touts itself as being 100% FREE. But then comes the natural reactionary question: is it ACTUALLY free? We all have all seen specific apps or services who practice the “freemium model”; but for a software that manages such vital business services, does this model help or you’re your business and is it smart to “bargain shop” for this key service? Although shopping for an accounting software isn’t like shopping for something as quality-impacted as laser eye surgery, you want to make sure your financials are being handled in a safe and effective manner.
I’ll admit, being spoiled by premium accounting software could lean me in one direction, however, self-identifying as a frugal techie (with a high usability tolerance for free software) could sway me back the other way. The marriage of these two traits, I believe creates a fair assessment. As you read this, take note that if I didn’t see a feature, when it was actually there (or a workaround exists) then it may be indicative of it being non-intuitive. Here’s my take on the basics of the free Wave software, its shortcomings and the places for improvement.
We must first acknowledge that a strict comparison to other premium accounting software is not a reasonable path to take with this review of sorts. We understand that a free software may not fully compare with premium competitors.
That being said, Wave Apps’ accounting software offers a sufficient “free lunch”; especially if you are a ‘hungry’ freelancer, someone who wants to manage personal finances, or small to micro-sized business, trying bootstrap.
The basic services Wave offers really ARE free. There are no tricks or strings attached. There are some ancillary services that are pay as you go but they aren’t a necessity for every business. Even better is that those basic services are paired down or lesser than the paid version. Wave can truly be called an “accounting software” as it offers billing and invoice tracking, it keeps running balances of your bank registers, it allows for reconciliation, it offers several of your standard accounting reports, and a few of the features that have become cloud accounting staples.
This free software doesn’t skimp on security either. Depending on the level of security your browser will allow, Wave can use up to 256-bit SSL/TLS encryption. This encryption level is congruent to many online banks.
Even with all of these great perks to this free software, you may still find it more beneficial to take the plunge to try another premium package (some of our favorites are QuickBooks and Xero), especially if you are growing small business. Now that we know the basics of this software, let’s take a look at some of the places that could be improved upon.
1) Chart of Accounts Customization
Like most accounting software, Wave creates a Chart of Accounts (COA) based on the business type you choose. While I see the value in this, it creates a strange catch 22 in which we lose customization ability (for example to create sub-accounts) to gain access to a templated version of your business’s predicted G/L accounts. Even in programs that are inferior to Wave Accounting, you can create sub-accounts. Sub-accounts help you logically group transaction categories and keep your reports and chart of accounts from getting bloated.
To dig deeper into that, when you go to “Add an Account,” to pseudo customize it, rather than letting you add an account type that Wave didn’t already offer, it just gives another list of pre-defined account. Instead of having it upfront, easily accessible, you must go all the way to the “Other” option of the respective account category, each time it seems. Upon selecting that option, you can then rename the category to what you want; too manual. To add to that, I cannot import a COA to save time. I suppose this isn’t a big deal, but it definitely doesn’t seem like a productive process.
2) Bank feeds
Speaking of saving time, a big red flag I saw, especially for your Real Estate Investors, is Wave’s lack of ability to add a category from the bank feeds section when you are categorizing imported transactions. Wave, once again, limits you to predefined options assuming I’d only want to create an expense (or income if it is an increase coming in) on the fly. When you are accounting for REI, you need to be able to create asset categories on the fly.
Additionally, I was expecting Wave to use some of its presumptive power that we spoke about above to prefill imported transactions with previous categorization choices. In most cases, businesses have spending habits, so it seems like a nice time saver to have access to.
Another bank feature I was hoping to see was the ability to set ‘custom bank rules’? Using conditional, automatic categorization with incoming transactions saves so much time! I don’t see this option with Wave. Every business has some recurring transactions. In Wave, I don’t even see an option to manually set recurring transactions either. So I’m left having to do a journal entry to record depreciation each time. There are other quirky issues with the categorization workflow within the bank feeds section, such as the way it ‘splits transactions’. It isn’t a big issue though.
Wave Accounting does have reporting. However, it doesn’t look like it has a Cash Flow Statement; just profit and loss and balance sheet. Also, I didn’t the option to really customize these reports; just date filtering. Even with a tempered expectation, this seems deficient.
4) Class tracking
Based on the above, it comes as no surprise that Wave Accounting doesn’t offer class tracking. Many people use class tracking as a way to gain greater control over expense tracking and categorization. In real estate accounting, for example, it has been often used to differentiate the transactions of multiple properties. While it doesn’t allow for this categorization, it does allow you to create multiple business accounts (I’m not sure on the upper limit); for FREE again. So, theoretically, if you want to manage the financials of another business or property, you could just go to another account when you login. I thought this option was GREAT! If they fix some of the issues I’ve mentioned earlier and later, this could be a BIG “selling” point.
We all know the benefits and productivity increases of data sharing; integrations allow for some serious workflow improvements. As such, I was disappointed to see the integration selection Wave Accounting had. By default, or those on the Integrations page, it offers just 3, third-party integrations; Paypal, Shoe-box, and Etsy. Random.
In comparison to Xero and QBO, Wave is like the “unpopular kid in school”. These other programs offer 100’s of different integration possibilities. Wave does have an open API, but it doesn’t seem like many softwares are already “playing with it.” You may just have to force some “friendships” using their API, and that’s not a hard thing to do, but it is a development cost.
Wave Accounting has huge potential, especially as it continues to either match and/or improve some of the standard cloud accounting offerings out there. In my opinion, if Wave added some of the features mentioned above it could be very competitive.
In conclusion, the biggest selling point for Wave Accounting is it’s ‘FREE’-dom. But until it offers more freedom in its functionality, I’d only suggest it to cost-conscious, small transaction micro-businesses. As evidenced from its ‘Wave Labs’ feature, Wave is in the process of rolling out more features and improvements. You’ll have to weigh the value of free versus being stuck on Wave’s development timeline.
If you’re interested in how Wave matches up with a specific competitor, reach out to me, I’d be happy to help you figure out which solution is best for you!