Most small business owners understand, in theory, that they should have an accounting system. The problem arises when trying to select accounting software when often you are not really sure what your accounting software should do. Every business has its own unique accounting and reporting needs. The ideal accounting software should be able to record your transactions, report on them and provide for analysis on the different facets of your business. If you are a freelancer or a small service provider, who prefers to do their own accounting, and is looking for a simple and cost effective accounting solution it is definitely worth taking a look at Wave Accounting. Below I have reviewed its benefits and limitations:
What I like about it:
It has a user friendly interface which explains in very simple, non-technical jargon what you need to know about your selection. Setup is simple and the dashboard section gives you a useful overview of your business.
It allows for integration of bank and credit card accounts, which after initial set up will automatically import transactions on an ongoing basis. Transactions are saved in an uncategorized file, which are then fairly simple to categorize by choosing the appropriate account on the right hand side.
For Canadian customers it incorporates GST, HST and QST entry into both invoices and expenses. It also provides a simple period end report, which can be used to complete government remittance reports.
The reporting functionality includes key business reports like Balance Sheet, Profit-Loss, Accounts Receivable and Payable aging, Sales Taxes. All reports can be output in PDF or exported to Excel
You can “invite collaborators” e.g. You can give your accountant or your business partner access to your accounting.
All your data is in the cloud, which makes access from anywhere simple. Accounting can be done on the go.
What are its limitations:
Although it provides for an online invoicing solution, customization appears to be limited. Additionally there is no time tracking function, which can be a bit of a limitation for those providing time based services. However, it does allow for integration with Freshbooks, which many freelancers already use. You can also connect your Google docs account which allows you to attach documents (spreadsheets, pdfs etc.) to specific transactions for reference purposes.
Update: Wave recently introduced some invoicing enhancements including 4 templates to choose from as well as colour customizations.
Formatting of reports is quite basic, which is fine for internal use. However, they have to be prettied up in excel before sending them externally.
Reporting is quite simple and does not allow for a great deal of customization. For example you can see your sales by customer, however not by product. Accounts receivable and payable aging are as of the current date. You cannot back date these reports, which can be important when analyzing a prior period.
There is no budgeting or forecasting capability.
You can’t import balances and transactions from other accounting software. This has to be done manually. Additionally, if you are contemplating changing from Wave to another accounting software you only export transactions to an excel file
There does not appear to be any inventory functionality. If you sell products and need to keep track of your inventory, this may not be the right program for you (unless you track it separately in a spreadsheet).
There is no iPhone app allowing you to enter transactions on the go.
Is Wave the Right Fit for Your Business?
For freelancers and smaller service providers who have limited need for analysis or use spreadsheets to keep track of budgets and perform sales analyses, my review of Wave Accounting Softare indicates that Wave can be an excellent choice. It is free and easy to use and provides you with financial information that you need without requiring much (or any) accounting knowledge. If your needs are more sophisticated however e.g. You have employees, you need to analyze your accounting data or you want to track and analyze your inventory it makes more sense to find a more advanced accounting software
Ronika Khanna is a Montreal accountant who helps small business owners with their accounting and tax requirements. To receive regular blog updates pertaining to small business, accounting, tax and other topics of interest to small business owners you can sign up here. You can also follow her on Facebook or Twitter.