Xero vs Wave: Which Accounting Software Is Best in 2023

Xero and Wave are both popular accounting software that share similar features, but Xero is more sophisticated bookkeeping software. Unlike Wave, it includes the tracking of inventory costs and the ability to print checks to pay your bills and process payroll. For small service-based businesses, Wave is a good free option to consider.

Xero vs Wave at a Glance

When To Use

Fit Small Business Case Study

In our comparative analysis of Wave and Xero, we see that Xero outranks Wave in all of the 11 key areas in our case study. However, we don’t discredit Wave’s features—even though it doesn’t perform as well as Xero. Considering that Wave is free, we’re still amazed by some of its features that aren’t present in most free and basic plans of many accounting software programs today.

You can review the detailed results of the case study in our Xero review and Wave review. The graph below presents a summary of how each software performed.

Wave’s best features lie in tax, reporting, and accounts receivable (A/R). Meanwhile, Xero gets a perfect score for project accounting and high scores for general features and reporting. In the succeeding sections, we’ll discuss the similarities and differences between Wave and Xero in selected key areas in our case study.

Xero vs Wave: Pricing

Xero Pricing

Xero offers three different subscription plans. Each supports unlimited users, but the higher packages include advanced features, such as multicurrency support, expense claim management, and project tracking. Xero also offers payroll through Gusto at $40 per month, plus $6 per month, per employee.

You can use Xero for free for 30 days before signing up for a paid subscription. For processing online payments, Xero integrates with Stripe, PayPal, and GoCardless.

Here are the processing fees applicable:

• PayPal:
  • Invoicing: 3.49% plus fixed fee; depends on currency received; if you’re receiving United States dollars, the fixed fee is 49 cents
  • Quick response (QR) code transactions $10.01 and above: 1.90% plus fixed fee
  • QR code transactions $10.00 and below: 2.40% plus fixed fee
  • Send & receive money for goods and services: 2.99% plus fixed fee
  • Standard credit and debit payments: 3.49% plus fixed fee
• Stripe:
  • Cards and wallets: 2.9% plus 30 cents per successful card charge; additional 1% for international cards and another 1% if currency conversion is required
  • Automated clearing house (ACH) debits and credits: 0.8% capped at $5
• GoCardless:
  • Within the United States: 1% plus 25 cents capped at $2.50; a fee of 0.3% applies if the transaction amount is above $1,000.
  • International: 2% plus 25 cents, including currency conversion rates provided by Wise.

Take note that these charges aren’t from Xero but payment channels. Integrating these channels is free on Xero.

Wave Pricing

All of Wave’s core functions of accounting, invoicing, and receipt tracking are free. You’ll only pay for processing credit card and bank payments and payroll transactions.

• Accounting, invoicing, and receipt tracking: Free
• Credit card processing: 2.9% plus 60 cents per transaction (for most cards), 3.4% plus 60 cents (for American Express) per transaction, and 1% bank payments fee (ACH) per transaction
• Bank payments (ACH): 1% per transaction, minimum of $1
• Payroll:
  • Tax service states: $40 per month plus $6 per employee or independent contractor for users living in tax-service states
  • Self-service states: $20 per month plus $6 per employee or independent contractor for users living in the remaining 36 states

Xero vs Wave: Features

Banking & Cash Management

Xero scores high in banking and cash management because of its easy-to-use cash management and bank reconciliation features. The best feature we like is its bank reconciliation module—except for the fact that users can’t enter ending balances of checking accounts to start reconciling. Instead, they must import the ending balance from their bank.

However, Xero provides a side-by-side presentation in reconciling bank and book items for you. Once you upload your bank statement, Xero will extract line items automatically from it and look for possible matches. If there are no matches, the platform will let you create a transaction.

In Wave, bank reconciliation is manual. First, you have to input the statement balance and set the dates covered for reconciliation. Then, you have to manually reconcile transactions by corroborating information from the bank statements and Wave and clicking the check icon to indicate that the transaction has been matched.

Xero and Wave may seem to have similar banking and cash management features at first glance. However, Wave lacks the functionality that we’re looking for in bank reconciliation. Although Wave may not have comprehensive reconciliation features, its simplicity matches the needs of small businesses with few banking transactions. But if you process a lot of bank transactions daily, Xero is a better option since it’s easier to reconcile.

Invoicing (A/R)

Xero performed well in our evaluation for A/R management. You can set sales prices, create customers, email invoices, accept short payments, and manage customer accounts in Xero. Functionality-wise, Xero’s invoicing is great except that it doesn’t enable users to customize the aesthetics, such as colors, of the invoice

However, Wave isn’t too far behind because it has similar features to Xero, such as emailing invoices, creating recurring invoices, managing customer accounts, and accepting short payments. The fine line between the two is that Wave cannot issue credit memos and sales receipts for sales paid immediately.

Accounts Payable (A/P)

Xero’s A/P management system gets 21 out of the 22 features we’re looking for in an A/P system. The only feature that Xero fell short of is with recurring payments. It can record recurring bills, but users have to record the payment of the bill manually. Typically, other accounting software programs record recurring expenses directly to the enrolled bank or credit card.

Meanwhile, Wave’s A/P system isn’t as comprehensive as Xero’s. It’s basic because it contains the foundations of an A/P management system like creating vendors, recording expenses, billings for inventory purchases, and viewing unpaid bills. Wave can’t issue credit memos, add unbilled labor and expenses, and view unbilled but incurred expenses.

Project Accounting

We give Xero a perfect 10 for project accounting because it contains all the features we’re looking for, especially project estimations, project cost assignment, and cost variance analysis. While Wave can be used to create estimates for a project, it cannot track costs by project.

Xero vs Wave: Ease of Use

Amid Xero’s comprehensive and advanced features, we’re giving it an average difficulty for ease of use. Given that there are many features to check out and study, it’ll take a little bit of time for users to get acquainted with the interconnectedness of the features.

However, setting up Xero for your business is easy because it follows a step-by-step process before landing on the dashboard. Its user experience (UX) is clean and not intimidating. There’s enough white space on the web page in case you’re multitasking on one computer screen. For subsequent use, it’s easy to use the solution, and we think it’ll take less than a week for new users to understand the basics of the software.

Wave is also easy to use. For free software, it delivers a clean and user-friendly interface. Since it possesses only basic accounting features unlike Xero, it’s not difficult to use. Most of its features are simple accounting and invoicing functions, so it would be easy for users to study how Wave works. Its UX is slightly more modern than Xero’s and deviates from using tabular presentations in some modules.

Xero vs Wave: Integrations

In terms of third-party app integrations, Xero wins. It features the Xero App Store, wherein you can get third-party apps that can integrate with Xero. You can use popular apps—like Stripe, PayPal, Gusto, DEAR Inventory, HubSpot CRM, Mailchimp, Hubdoc—and other industry-specific apps. Xero also integrates with apps that we’ve reviewed. You can read our Dext Prepare, Hurdlr, and Expensify reviews for additional insights.

Meanwhile, to integrate Wave with third-party apps, you must first subscribe to Zapier and create Zaps for every app you want to integrate.

Xero vs Wave: Mobile App Functionality

You can download Xero and Wave mobile apps from Google Play and App Store. Both apps have very basic features, and we find the apps lacking in important features. At the very least, Wave’s mobile app is already a bonus given that it’s a free service, so we wouldn’t put too much emphasis on the missing features of Wave’s mobile app.

However, Xero’s mobile app isn’t as comprehensive compared to the high-quality app available with Zoho Books. Overall, Xero and Wave’s mobile apps can do better, especially for Xero since it’s a paid service.

Xero vs Wave: Assisted Bookkeeping

Both Xero and Wave have assisted bookkeeping services in the form of Bookkeeper360 and Wave Advisors. With the advisor programs of Wave, you can get one-on-one bookkeeping and advisory services. You’ll also receive the following additional services at the following price points:

• Bookkeeping and payroll support: $149 and up per month; best for entrepreneurs who want to outsource bookkeeping
• Accounting and payroll coaching: $379 one-time fee for a one-hour coaching session and 30 days of email support from your coach; best for Wave users who want to do their own bookkeeping

Unlike Wave, Xero has partnered with Bookkeeper360 to provide assisted bookkeeping services. We selected Bookkeeper360 as the best online bookkeeping service for Xero users because of its scalability and seamless integration with Xero accounts. Bookkeeper360 offers accounting, bookkeeping, and business advisory services:

• Pay-as-You-Go: $125 per hour of bookkeeping support
• Monthly: Starting at $399 per month for cash-based businesses and $549 per month for accrual-based businesses, including support
• Weekly: Starting at $549 per month for cash-based businesses and $749 per month for accrual-based businesses, including support

Xero vs Wave: Customer Support

Xero and Wave’s customer support is poor. With Xero, you can only access support by chatbot and email or through self-help information. Meanwhile, Wave offers support only by chatbot, and its self-help information isn’t detailed. Neither provider gives a phone number where customers can reach them. We recommend Zoho Books for excellent customer support.

Xero vs Wave: User Reviews

Users who left Xero reviews said that the tool is easy to set up and use, adding that it has a simple and clean user interface along with intuitive features. Some also praised its fixed assets manager and project accounting capabilities. However, its inability to reconcile transactions without bank feeds and its lack of live phone and chat support are its biggest drawbacks.

It earned the following average scores on popular review sites:

• G2: 4.4 out of 5 based on about 510 reviews
• GetApp: 4.4 out of 5 based on around 2,390 reviews
• TrustRadius: 8.7 out of 10 based on about 570 reviews

Meanwhile, Wave users like that the free solution is very easy to use and that it gives small business owners the tools they need to get the business up and running. Those who left feedback on the mobile app said that they appreciate that it allows them to invoice customers while working remotely. The solution’s biggest drawback is its lack of live phone support.

Wave earned the following average scores on popular review sites:

• G2: 4.4 out of 5 based on about 270 reviews
• Software Advice: 4.5 out of 5 based on around 1,340 reviews
• TrustRadius: 7.1 out of 10 based on about 160 reviews

Frequently Asked Questions (FAQs)

Does Wave charge for payroll?

Yes, the price of your monthly payroll subscription depends on whether you’re doing business in a state in which Wave offers automated tax payments and filings. The monthly price of a new payroll subscription in states where tax payments and filings are available is a $40 base rate plus $6 per active employee or contractor paid. In all other states, the monthly price of a new payroll subscription is $20 base and $6 per active employee or contractor paid.

Does Xero have project accounting features?

Yes, Xero has robust project accounting tools that include project estimations, project cost assignment, and cost variance analysis.

How much does Wave charge to receive electronic payments?

Wave charges the following fees, based on the type of transaction: for credit card processing, 2.9% + 60 cents per transaction (for most cards), 3.4% + 60 cents (for American Express) per transaction, and 1% bank payments fee (ACH) per transaction. Bank payments (ACH) charge a fee of 1% per transaction with a minimum of $1.

How We Evaluated Accounting Software

We evaluated the small business accounting software based on ease of use, pricing, and how well it performed against the ideal features we’re seeking, including project accounting, inventory management, and mobile accounting. Our evaluation was based on a rubric scoring methodology in six categories, each with a designated appropriate percentage.

Our criteria for choosing the best small business accounting software are as follows:

Bottom Line

In our in-depth evaluation of Wave and Xero, we explained the ins and outs of each software. However, we don’t discourage you from choosing one over the other. We recommend Wave for small businesses that don’t need complex accounting features. Although it’s limited in many aspects, it’s still flexible enough for basic accounting functions. Meanwhile, Xero offers a complete bookkeeping solution. We recommend it for product-based retailers and manufacturers needing to keep track of inventories.