Free accounting software or paid powerhouse? Let’s help you decide!
What Are Xero and Wave?
Choosing accounting software for your small business? You’ve probably stumbled across two very different options: Xero and Wave. And here’s the wild thing – one of them is completely free!
Wave is the underdog that makes accountants do a double-take. Why? Because their core accounting and invoicing features are 100% FREE. Forever. No credit card needed. No hidden fees. Founded in 2010 in Toronto, Canada, Wave has grown to serve over 4 million small businesses. Their motto? “Simple, powerful, and free accounting software.”
Xero is the established player from New Zealand (founded 2006) with over 4.4 million subscribers worldwide. It’s not free, but it’s packed with features, integrations, and scalability that Wave simply can’t match. Think of it as the “pay for what you get” option – and you get a LOT.
🆓 Wave is FREE!
Yes, you read that right. FREE accounting software that actually works!
Quick Comparison at a Glance
| Feature | Wave | Xero |
|---|---|---|
| Starting Price | FREE! ($0/month) | $20/month |
| Free Plan Available? | ✅ Yes! Full accounting free forever | ❌ No (30-day free trial) |
| Best For | Freelancers & micro businesses | Growing small to medium businesses |
| Number of Users | Up to 9 collaborators | Unlimited |
| Integrations | Limited (~20) | 1,000+ |
| Inventory Management | ❌ No | ✅ Yes |
| Project Tracking | ❌ No | ✅ Yes |
| Mobile App | ✅ Good | ✅ Excellent |
| Geographic Availability | US & Canada only (full features) | 180+ countries |
| User Rating | 4.4/5 | 4.4/5 |
Pricing: Free vs Paid – The Big Decision
Wave Pricing (The FREE Option!)
| Plan Name | Price | What You Get |
|---|---|---|
| Starter (Free!) | $0/month | Unlimited invoicing, expense tracking, basic accounting, bank connections, receipt scanning |
| Pro | $16/month | Everything in Starter + recurring invoices, accounting reports, multiple businesses |
⚠️ Wave’s “Free” Has Some Catches:
Transaction Fees: Wave makes money when you accept payments from customers:
- Credit card payments: 2.9% + $0.60 per transaction
- American Express: 3.4% + $0.60 per transaction
- Bank payments (ACH): 1% (minimum $1)
Payroll is Extra: Wave Payroll costs $20-40/month + $6 per employee (varies by state)
Xero Pricing (The Paid Powerhouse)
| Plan Name | Price | What You Get |
|---|---|---|
| Early | $20/month | 20 invoices, 5 bills, unlimited users, bank reconciliation, inventory |
| Growing | $47/month | Unlimited invoices/bills, multi-currency, quotes, unlimited users |
| Established | $80/month | Everything + project tracking, expenses, multi-currency, unlimited users |
💡 The Real Cost Comparison
Wave FREE vs Xero $20-80/month. BUT – if you process $1,000 in credit card payments monthly with Wave, you’ll pay ~$29 in fees. That’s more than Xero’s starting price!
The Big Question: When is “Free” Actually Worth It?
Here’s the honest truth: Wave being free is AMAZING… but only if it fits your needs. Let me break this down:
Wave is Perfect (and Truly Free) If You:
- Send invoices but customers pay by check or cash (no transaction fees!)
- Are a freelancer or solopreneur just starting out
- Have very simple accounting needs
- Process less than $500/month in online payments
- Are based in the US or Canada
- Don’t need inventory or project management
- Have fewer than 9 people who need access
⚠️ Wave Won’t Cut It If You:
- Process thousands in credit card payments (those 2.9% fees add up FAST!)
- Need inventory management
- Want project tracking or time tracking
- Require advanced reporting
- Need more than 20 app integrations
- Are planning to scale beyond a micro business
- Are located outside the US/Canada (limited features)
Feature Comparison: What Can They Actually Do?
Feature Ratings ComparisonEase of Use: 4.5/5Invoicing: 4.3/5Bank Reconciliation: 4.0/5Reporting: 3.8/5Integrations: 3.5/5Value for Money: 5.0/5 (FREE!)4.4/54.4/54.6/54.3/54.7/54.2/5Wave (Free!)Xero (Paid)
Invoicing & Getting Paid
Wave’s Invoicing: Honestly, Wave’s invoicing is fantastic – especially for free! You can create unlimited professional invoices, customize them with your branding, set up automatic payment reminders, and track invoice status. The interface is clean and simple. However, recurring invoices are only available in the Pro plan ($16/month).
Xero’s Invoicing: Xero takes invoicing up a notch with more customization options, recurring invoices on all plans, quote-to-invoice conversion, and better integration with payment processors. You can also handle international clients more easily with multi-currency support.
Winner: Xero for features, Wave for price! If you just need basic invoicing, Wave’s free plan is unbeatable. But if you need advanced features, Xero wins.
Bank Reconciliation
Both platforms connect to your bank and automatically import transactions. But there are differences:
Wave: Bank reconciliation works well for simple needs. You can connect to major US and Canadian banks, and the system suggests matches for transactions. It’s straightforward but can sometimes have connection issues according to user reviews.
Xero: Bank reconciliation is one of Xero’s strongest features. It’s faster, smarter (learns from your patterns), and more reliable. You can reconcile from your phone, create rules for automatic matching, and it rarely has connection issues.
Winner: Xero 🏆
Superior bank reconciliation with better automation and reliability!
Reporting & Financial Insights
| Report Type | Wave (Free) | Wave (Pro) | Xero |
|---|---|---|---|
| Profit & Loss | Basic | ✅ Detailed | ✅ Advanced |
| Balance Sheet | Basic | ✅ Detailed | ✅ Advanced |
| Cash Flow | ❌ No | ✅ Yes | ✅ Yes + forecasting |
| Custom Reports | ❌ No | Limited | ✅ Extensive |
| Number of Reports | ~10 basic | ~20 | 55+ built-in |
Winner: Xero – Much more comprehensive reporting. Wave’s free plan has very basic reports, and even the Pro plan can’t match Xero’s depth.
Inventory Management
📦 Big Difference Here!
Wave: NO inventory management at all
Xero: Full inventory tracking included in ALL plans
If you sell physical products, this is a deal-breaker. Wave simply doesn’t have inventory management. You’d need to use a separate app or spreadsheet. Xero includes inventory tracking, stock management, and product costing in even its cheapest plan.
Integrations & Add-ons
This is where the gap widens significantly:
Wave has about 20 integrations, mainly focused on:
- Payment processing (Stripe)
- Payroll (Wave Payroll)
- Basic business tools
Xero connects with 1,000+ apps including:
- E-commerce: Shopify, WooCommerce, Amazon, eBay
- Payments: Stripe, PayPal, Square, GoCardless
- Payroll: Gusto, Employment Hero, ADP
- CRM: Salesforce, HubSpot
- Inventory: Unleashed, Cin7, TradeGecko
- Project management: Asana, Trello, Monday.com
- And 900+ more!
Winner: Xero by a LANDSLIDE! 🏆
1,000+ integrations vs 20. No contest!
User Access & Collaboration
Wave: Supports up to 9 collaborators (yourself + 8 others). This includes your accountant, bookkeeper, and team members. For most micro businesses, this is plenty.
Xero: Unlimited users on ALL plans. Add as many people as you need – your entire team, multiple accountants, bookkeepers, business partners. No extra cost!
Winner: Xero – Unlimited users beats limited every time, especially as your business grows.
Mobile Apps
Both have mobile apps for iOS and Android, but with different capabilities:
Wave’s mobile app is good for basic tasks – send invoices, snap receipts, check your dashboard. But it’s more limited than the web version.
Xero’s mobile app is excellent and highly rated (4.5/5). You can do almost everything from your phone – reconcile transactions, manage bills, create invoices, track projects. It’s like having the full software in your pocket!
Ease of Use: Which is Friendlier?
Wave – Simple & Straightforward
- Super easy to learn
- Clean, minimal interface
- Perfect for non-accountants
- No overwhelming features
- Rated 4.5/5 for ease of use
- Great for beginners
- Quick setup (under 15 minutes)
Xero – Powerful but Polished
- Beautiful, modern interface
- Intuitive navigation
- Steeper learning curve (more features)
- Excellent tutorials and help
- Rated 4.4/5 for ease of use
- Takes more time to master
- Setup takes 30-60 minutes
Winner: Wave for absolute beginners, Xero for those willing to learn! Wave is simpler because it has fewer features. Xero has more to learn but is still user-friendly once you get the hang of it.
Customer Support: Getting Help When You Need It
| Support Type | Wave (Free) | Wave (Pro) | Xero |
|---|---|---|---|
| Phone Support | ❌ No | ❌ No | ❌ No |
| Live Chat | ❌ No | ✅ Limited | ✅ Yes (24/7) |
| Email Support | ✅ Yes (slow) | ✅ Yes (faster) | ✅ Yes |
| Help Articles | ✅ Good | ✅ Good | ✅ Excellent |
| Community Forum | ✅ Active | ✅ Active | ✅ Very active |
Winner: Xero – Better support overall with 24/7 chat. Wave’s free support is understandably limited.
Geographic Availability: A HUGE Consideration!
⚠️ IMPORTANT: Wave is Limited to North America!
Wave’s full features (bank feeds, payroll, payment processing) only work in the United States and Canada.
If you’re outside North America, you can still use Wave for basic invoicing and manual accounting, but you’ll miss out on automatic bank connections, payroll, and easy payment processing. This is a major limitation!
Xero works in 180+ countries with full features everywhere. Multi-currency support, global bank connections, and compliance features for different regions. It’s truly global software.
Winner: Xero – Unless you’re in the US or Canada, Wave isn’t even a real option!
What Real Users Are Saying
⭐ Overall Ratings
Wave: 4.4 out of 5 stars | Xero: 4.4 out of 5 stars
(Both highly rated, but for different reasons!)
Positive Reviews for Wave
“Perfect for my freelance business!”
“I can’t believe Wave is free. I’ve been using it for two years for my design business. I send about 10 invoices a month, my clients pay by check mostly, and I track my expenses. It’s all I need and it costs me nothing!” – Freelance Designer
“Great starter option”
“When I started my business, I had zero budget for software. Wave let me look professional with invoices and track my income for taxes without spending a penny. Now I’m making more money and considering Xero, but Wave got me started!” – New Business Owner
“Simple and does the job”
“I’m not tech-savvy and Wave is perfect for me. Simple interface, easy invoicing, and I can see how much money I’m making. The fact that it’s free is just incredible.” – Consultant
Positive Reviews for Xero
“Worth every penny!”
“I used Wave when I started, but once I had inventory and 5 employees, I needed more. Xero has everything – inventory tracking, unlimited users, amazing integrations. I process $10K+ in payments monthly, so I’m actually saving money vs Wave’s transaction fees!” – Online Store Owner
“Scales with your business”
“Started with Wave, outgrew it fast. Xero handles everything I throw at it – multiple projects, team time tracking, complex reporting. It’s professional software that doesn’t hold me back as I grow.” – Agency Owner
“Game-changing integrations”
“The Xero + Shopify + Stripe integration is seamless. Everything syncs automatically. My bookkeeper can access everything, and I can check my finances from my phone. So much better than Wave’s limited options!” – E-commerce Business
Common Complaints
Wave users mention:
- Transaction fees add up quickly if processing lots of payments
- Bank connection issues and disconnections
- Limited reporting (even in Pro plan)
- No inventory management at all
- Customer support is slow for free users
- Not suitable for scaling businesses
- Limited to US/Canada for full features
Xero users mention:
- Monthly cost adds up (though often worth it)
- Learning curve can be steep for beginners
- No phone support
- Might be overkill for very simple businesses
- Price increases over time
Pros and Cons Summary
Wave
✅ Pros
- 100% FREE core software
- No credit card required
- Unlimited invoicing (even free plan)
- Very easy to use
- Great for freelancers and micro businesses
- Professional-looking invoices
- Receipt scanning included
- Good for very simple accounting needs
- No long-term commitment
❌ Cons
- Transaction fees eat into profits (2.9% + $0.60)
- NO inventory management
- NO project tracking
- Very limited integrations (~20)
- Only 9 users maximum
- Basic reporting (even in Pro)
- Limited support for free users
- Full features only in US/Canada
- Not scalable for growing businesses
- Bank connection issues reported
Xero
✅ Pros
- Comprehensive feature set
- Unlimited users on all plans
- 1,000+ app integrations
- Inventory management included
- Project and time tracking
- Excellent mobile app
- Superior bank reconciliation
- 55+ built-in reports
- Multi-currency support
- Works in 180+ countries
- Highly scalable
- 24/7 chat support
❌ Cons
- Not free ($20-80/month)
- Steeper learning curve
- No phone support
- Can feel overwhelming for simple needs
- Prices increase over time
- Might be overkill for solo freelancers
Which Should You Choose?
Choose Wave if you:
- Are a freelancer or solopreneur
- Have very simple accounting needs
- Are on a tight budget (or no budget!)
- Don’t process many online payments
- Don’t need inventory management
- Are just starting out
- Are based in US or Canada
- Have fewer than 9 people needing access
- Want to test accounting software for free
Choose Xero if you:
- Are growing beyond micro business
- Need inventory management
- Want project and time tracking
- Process lots of online payments
- Need 10+ users or unlimited access
- Want 1,000+ integrations
- Need advanced reporting
- Are located outside US/Canada
- Plan to scale your business
- Need professional software long-term
The Math: When Does “Free” Stop Being Worth It?
💵 Let’s Do the Math!
Scenario 1: Freelancer with $1,000/month in online payments
- Wave “Free”: $29/month in transaction fees (2.9% × $1,000)
- Xero Early: $20/month + your own payment processor fees (usually better rates)
- Winner: Xero is actually CHEAPER!
Scenario 2: Consultant with $500/month in checks/cash
- Wave Free: $0/month (no transaction fees if not using Wave Payments)
- Xero Early: $20/month
- Winner: Wave is FREE!
Scenario 3: Online store with $5,000/month in sales
- Wave “Free”: $145/month in fees + no inventory management
- Xero Growing: $47/month + full inventory + integrations
- Winner: Xero saves you $98/month AND gives you more features!
My Personal Experience and Recommendation
Why I Prefer Xero (But Wave Has Its Place!)
Okay, I need to be totally honest with you. I’ve used both Wave and Xero extensively, and here’s my take:
Wave is AMAZING… for exactly the right situation.
When I first started as a freelance consultant, Wave was a godsend. I had zero budget for software, I only sent about 5-10 invoices per month, and my clients paid by check. Wave let me look professional, track my income, and organize my finances without spending a penny. For that early stage? Absolutely perfect!
The invoices looked great, the interface was simple enough that I could figure it out in 15 minutes, and I felt like a “real business” without the real costs. I genuinely loved it during that phase.
But Then I Started Growing…
Here’s where things changed. Within 6 months, I started getting more clients. They wanted to pay by credit card. I was processing about $2,000/month in online payments. Wave was charging me $58/month in transaction fees (2.9% × $2,000). I was also starting to lose track of which projects were profitable because Wave doesn’t have project tracking.
That’s when I realized: Wave wasn’t “free” anymore. It was actually COSTING me more than paid software!
The Switch to Xero Changed Everything
When I moved to Xero, three things happened immediately:
1. I saved money! At $47/month for Xero Growing (vs $58 in Wave fees), I was paying LESS. Plus, using Stripe directly instead of Wave Payments gave me better rates.
2. I got serious features: Project tracking meant I could finally see which clients were actually profitable. Inventory management let me track products I was selling. Time tracking showed me where my hours were going. These weren’t luxuries – they were necessities for running a proper business.
3. Integration heaven: Connecting Xero to my CRM, my project management tool, my e-commerce store – everything just worked together. With Wave, I was juggling separate tools that didn’t talk to each other.
The Mobile App Difference
I travel a lot, and Xero’s mobile app is genuinely excellent. I can reconcile my bank transactions from a coffee shop, send invoices from client meetings, and check my cash flow from anywhere. Wave’s app is okay, but it’s like comparing a smartphone to a basic phone – both make calls, but one does so much more!
The Geographic Thing is Real
I started working with international clients, and suddenly Wave’s US/Canada limitation became a problem. Xero’s multi-currency support and global availability meant I could invoice in different currencies and manage everything in one place.
But Here’s Where Wave STILL Wins:
I still recommend Wave to friends who are just starting out. If you’re a side hustler with simple needs, if your clients pay by check or cash, if you’re sending fewer than 20 invoices a month – Wave is genuinely fantastic. The free plan gives you everything you need for that stage of business.
I also love that Wave exists because it makes accounting software accessible to everyone. Not every new business can afford $50-80/month for software. Wave fills a real need.
The Honest Comparison:
Think of it this way:
- Wave is like a bicycle – free (or cheap), gets you where you need to go, perfect for short trips, but limited speed and capacity
- Xero is like a car – costs money to run, but faster, more capable, better for longer journeys, and essential as your needs grow
My Bottom Line:
For absolute beginners, freelancers with simple needs, or anyone testing if they need accounting software at all – start with Wave. It’s free, it works, and it’s better than spreadsheets or shoebox receipts.
But if you’re serious about growing your business, if you process online payments regularly, if you need inventory management, or if you’re already past the “micro business” stage – Xero is absolutely worth the investment. It’s not an expense; it’s infrastructure for growth.
The Real Winner? Both!
Wave for starting, Xero for scaling. They both serve important purposes at different stages of business growth.
I rate Wave 8/10 for what it is (free, simple, perfect for beginners) and Xero 9/10 for being a complete business solution.
Xero is my preference for serious businesses, but Wave deserves respect for what it offers! 🎯
Final Verdict: Free vs Paid
After comparing features, pricing (including hidden costs!), ease of use, and real-world usage, here’s my conclusion:
Wave is the right choice if you:
- Are just starting out with limited budget
- Have very simple accounting needs
- Don’t process many online payments (or get paid by check/cash)
- Are a freelancer or solopreneur
- Are testing whether you even need accounting software
- Are based in the US or Canada
- Don’t need inventory or advanced features
Xero is the right choice if you:
- Process more than $500-1000/month in online payments
- Need inventory management
- Want project tracking and advanced reporting
- Need more than 9 users
- Require 1,000+ app integrations
- Are located outside North America
- Plan to grow beyond a micro business
- Want professional, scalable software
The Smart Strategy: Start with Wave, Graduate to Xero
💡 Pro Tip: You Don’t Have to Choose Forever!
Many successful businesses follow this path:
- Year 1: Start with Wave (free) to learn accounting basics and save money
- Year 2: As revenue grows past $30-50K, evaluate if you need more features
- Year 3+: Switch to Xero when you need inventory, projects, or better integrations
This lets you keep costs low when starting, then invest in better tools as you can afford them!
Try Them Both!
The best part? You can try both risk-free:
- Wave: Sign up for FREE, no credit card needed, use it forever
- Xero: 30-day free trial, no credit card required
My recommendation: Start with Wave’s free plan right now. Use it for a month. If it does everything you need, great – you’ve saved money! If you find yourself limited by it, try Xero’s 30-day trial and compare.
Frequently Asked Questions
Is Wave really 100% free?
Yes! The core accounting and invoicing software is completely free forever with no credit card required. Wave makes money from optional payment processing (transaction fees) and payroll services. If you don’t use those, it’s genuinely free!
Can I switch from Wave to Xero later?
Yes! You can export your data from Wave and import it into Xero. It takes some time to set up, but it’s definitely doable. Many businesses start with Wave and move to Xero as they grow.
Which is better for e-commerce?
Xero wins hands-down! It has native integrations with Shopify, WooCommerce, Amazon, eBay, and includes inventory management. Wave doesn’t have inventory tracking or good e-commerce integrations.
Does Wave work outside the US and Canada?
Technically yes, but with major limitations. You won’t get automatic bank feeds, full payroll support, or easy payment processing. For international businesses, Xero is the better choice.
How much do Wave’s transaction fees really cost?
At 2.9% + $0.60 per credit card transaction, they add up fast. If you process $1,000/month, that’s $29 in fees. Process $5,000/month? That’s $145! Compare that to Xero’s flat monthly fee – sometimes Xero is actually cheaper!
Which has better customer support?
Xero has better support with 24/7 chat. Wave’s free plan has email support only, and it can be slow. This makes sense – you get what you pay for!
Can I use both for different businesses?
Absolutely! Many entrepreneurs use Wave for side hustles or simple projects, and Xero for their main business. Use the right tool for each situation!
Conclusion: Smart Decisions for Your Business Stage
The Xero vs Wave debate isn’t really about which is “better” – it’s about which is better FOR YOU right now.
Wave is a genuinely fantastic free tool that has helped millions of small businesses get started. If you’re early in your journey, on a tight budget, or have simple needs, Wave is an obvious choice. It’s hard to argue with “free” when it actually works well!
Xero is professional accounting software that’s worth the investment when you’re ready for it. The unlimited users, 1,000+ integrations, inventory management, project tracking, and superior features make it the choice for businesses that are serious about growing.
Here’s what I tell every business owner: Start where you are, but plan to graduate. Wave is perfect for the beginning, Xero is perfect for the middle and beyond.
The fact that you’re reading this comparison means you’re thinking seriously about your business finances – and that’s already putting you ahead of most small businesses! Whether you choose Wave or Xero, you’re making a smart move by using proper accounting software instead of spreadsheets or shoeboxes.
Start with Wave today for free, and when you’re ready to level up, Xero is waiting! 🚀
