Xero vs Wave: Figuring Out the Best for 2020

By Dena LandonWriter
— Last Updated:

Xero and Wave are well-known, serviceable cloud-based accounting software programs. Both include core bookkeeping functions, such as invoicing and bill payment, bank reconciliations and reporting. In this Xero vs. Wave head-to-head, we’re going to see which comes out on top.

Differences appear when comparing additional options such as fixed assets and projects or monthly fees, and examining them will help you choose the better service for your business.  

For a more in-depth analysis of each program, read our Xero review and Wave review. You can also look at our best accounting software for highlights on them and their competitors.

1. Invoicing

Many businesses start investigating cloud-based accounting software after realizing they need a better method of invoicing and tracking payments than an online bank account. While all cloud-based accounting programs let you invoice customers, their features aren’t the same. Below is a chart comparing Xero and Wave that shows which they include.

Send recurring invoices
Automatically add late fees
Send payment reminders
Integrate with inventory (included)
Bill for hours worked (at highest plan)
Customize invoices (by uploading templates)

Neither service has a standard invoice form with a box for terms, such as 1 percent or net 30. Unlike Wave’s, Xero’s doesn’t have a place to add notes for your customers, either, so you can’t manually indicate terms.. For some businesses, that won’t be a big deal, but others need the option.

Many businesses prefer to have a standard appearance to customers across all communications, including invoices.

With Wave, you can add a logo, choose colors and add or remove columns.

Xero lets you customize invoices by uploading an Excel template, but the lines on your template must be mapped to the service’s existing invoices. It’s a less versatile and more cumbersome way to do it than Wave’s method.

If your business bills for the same products or services each month, recurring billing is a nice time-saving function. Xero and Wave have it, and they make it easy to set up.

You’ll find “repeating invoice” under the “sales” drop-down menu on Xero’s main dashboard. After inputting an invoice, you can select how often it repeats and an end date.


In Wave, recurring billing is also found on the main menu under “sales.” Customers can choose to keep their credit card on file and automatically pay recurring invoices, too. If they do so, Wave just sends them a receipt.

Xero offers inventory tracking for up to 4,000 items with assigned SKUs and unlimited untracked items. If you’re selling something from your inventory, you can pick it from a drop-down menu on the invoice. The service will update the quantity on hand and keep track for you.

Wave has no built-in inventory options. If you want to compare Xero to another accounting program with inventory, we suggest reading our FreshBooks review or, better yet, our OneUp review.

Businesses that bill by the hour or need to pass expenses on to clients will appreciate that both can be done with Xero. It even lets you ask for deposits on projects. UK readers may want to check out our FreeAgent review, though.

Wave has no projects function, so its invoices don’t allow you to bill for hourly work or expenses. It doesn’t include time tracking, either.

After you’ve sent an invoice, it’s important to stay on top of collection. Automatic payment reminders are invaluable, and both Xero and Wave have them.

Xero gives you four options for when to send a reminder: seven, 14, 21 or a custom number of days past due. Your selection has to be made through the “settings” menu and will apply to all customers.

Wave has seven payment reminder options. Reminders can be set on the invoice tab and after an invoice has been saved, which is more intuitive than it is with Xero.

Unfortunately, you can’t set the invoice to add late fees in either program.

Even with payment reminders, you’ll need to monitor your past due receivables.

Wave’s dashboard shows you outstanding and past due invoices at the top left, reminding you every time you log in to follow up with clients. It also has an accounts receivable aging report broken out by customer and length of time the invoices have been past due.


Xero’s dashboard presents the same information on the right side of the login screen.


Overall, we prefer the simpler process of invoicing in Wave, so, unless you need inventory tracking, it wins this round.

Round: Invoicing
Point for Wave Accounting
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2. Bills

In Xero, purchase orders can be converted into bills. The service calculates and adds a sales tax item according to the rate you input when setting up your company.


Wave’s simple bill payment form has the standard fields and lets you assign an expense account to put the bill toward. It doesn’t have a line item for sales tax, though.

If your business pays the same bills monthly, Xero gives you the option to check a box to make a bill recurring after creating it.  Wave has no recurring bill payment options, which means that you’d be entering recurring bills over and over again.

Bills are broken out on Xero’s main “bills” screen by status. They can be drafts, awaiting approval, awaiting payment or overdue. Below that, they’re presented in a bar chart.


Xero also has two aged payables reports. One is a condensed report grouped into common buckets of past due times and the other is a detailed report by vendor. Wave’s aged payables report has a similar look and provides a purchases by vendor report to track your top bills.


Because it has a recurring function and sales tax, Xero is the winner in the bills category. Xero also beat out the contender in this category in our FreshBooks vs Xero article, as it’s one of the best in the industry.

Round: Bills
Point for Xero Accounting
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3. Reports

Reports and financial statements guide you in making high-level business decisions. Without them, you’ll have to export a lot of data to Excel if you want to make sense of it. Both Xero and Wave provide reports, but Xero gives you more.

Xero pulls the data you’ve input into customizable reports that give you deeper insight into different aspects of your business. In addition to a trial balance and general ledger, it tracks fixed assets information in five reports, payroll in 12 reports and basic information on sales and payables. The payroll reports also serve some human resources functions.


Customization options include adding or removing columns from a report, changing how information is displayed or grouped and applying filters.

Other than selecting a date range, Wave’s reports can’t be customized. Its 12 reports cover the necessities, from accounts receivable aging to income by customer, but don’t give deep insight. A small business would be served well by them, but a growing or large business would need more.


Often requested by banks or lenders, financial statements present a high-level view of your business. A profit and loss report calculates your net income, a balance sheet summarizes your assets and liabilities, and a cashflow statement shows your cash in and out during a period. Xero and Wave give you all three, but the former also has an equity statement.

The equity statement isn’t often used for analysis, but it can be useful if you want to see owners’ contributions and withdrawals from the business. If you share ownership, it’s a plus that the report is included.

When it comes to reports, Xero wins. It has more reports than Wave, including an equity statement, and they’re customizable.

Round: Reports
Point for Xero Accounting
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4. Pricing

Xero follows the industry convention of offering three pricing plans to align with users’ needs. For basic functions, Wave is free. According to its website, the company makes enough from payroll and merchant processing fees that it can give users free access to everything else. For this reason, we won’t discuss Wave until we move into the functions for which it charges.

Xero’s monthly pricing plans begin with Early. It costs $9 a month, but limits users to sending five invoices and quotes, entering five bills, and reconciling 20 bank transactions. Xero gives you inventory tracking regardless of the plan you’re on, but, unless you need that, Wave is the better option at this level.

The mid-tier pricing plan for Xero, Growing, costs $30 per month and removes transaction limits. You can also process payroll for up to five employees.  

At $60 a month, Xero’s premium plan, Established, just doesn’t seem worth the price increase. It only adds payroll processing for an additional five employees, multi-currency and projects.

The limited payroll processing in Xero will serve a small business’s needs well.

In Wave, users in tax service states pay a $35 a month base fee plus $4 per employee for payroll processing. The base fee in those states includes collecting and filing state and federal taxes. Users in states where that service is not available pay a base fee of $20 a month.

Enabling customers  to click a link and pay their bill online often helps companies get paid faster. Wave charges 2.9 percent of the total credit card transaction, plus 30 cents per transaction. The service charges 1 percent of the transaction for payments made directly from a bank account. QuickBooks Online doesn’t charge for processing those (read our QuickBooks Online review).

Xero doesn’t offer integrated merchant processing. Instead, you’ll have to use a payment provider, such as PayPal or Stripe. That means you’ll have to go through the hassle of setting up a separate account and you’ll be at the mercy of their fees.

The winner in the pricing category is Wave. It’s free for the most part and the services it does charge for integrate with it.

Round: Pricing
Point for Wave Accounting
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5. User-Friendliness

There is little to differentiate Xero and Wave in user-friendliness. They both feature clearly labeled menus, easy navigation, and simple account setup. Neither has phone support, but both have online libraries of help articles.

Wave’s articles don’t include videos or screenshots, though, which makes it harder for visual learners to learn new processes. Xero has videos in the “Xero 101” section of its websites and offers frequent webinars. Both offer chat and email support.

Nothing distinguishes either program from the other in this category, though check out how Xero and QuickBooks Online compare to get an idea of the lay of the land.

Round: User-Friendliness
No clear winner, points for both
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6. Advanced Functions

Xero built its software for businesses that carry inventory and fixed assets. If you’ve been tracking your fixed assets in a spreadsheet, it takes one step to upload them into the software. Once added, Xero calculates depreciation and tracks disposals for you. Wave has no fixed assets capabilities.


Wave doesn’t have a projects function, either. Xero’s includes time tracking, the ability to mark an expense you’ve paid as billable to a client and lets you collect deposits on projects. That said, FreshBooks gives you much more in its projects module.


Xero beats Wave in advanced functions, but it’s worth noting that not every business will need those options. While a creative business that produces projects and bills hourly might want Xero, a business that operates differently might prefer Wave’s free option.

Round: Advanced Functions
No clear winner, points for both
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7. The Verdict

The most compelling reason to choose Xero over Wave is if your business carries and sells inventory and needs to track fixed assets. Xero’s inventory reports will keep you on top of turnover and reorder quantities. Integrated fixed assets eliminate the need to book separate journal entries for depreciation.

Xero enables you to bill for hours worked, its inventory syncs with invoices and it includes projects. Since Wave doesn’t have those functions, you will have to go with Xero if they’re on your list of “must-haves.”

That said, if your business doesn’t require them, there are only minor differences between the two services. Wave’s price — free — can’t be beat. Even if you pay extra for payroll processing, it could still be cheaper than Xero.

Have you tried Xero, Wave or both? Which did you prefer? Let us know about your experiences in the comments below. Thank you for reading.