I’ve been following Wave since its founding back in November 2010. The company has an interesting approach to the traditionally conservative accounting software space – it’s product is provided to the user at no cost who, in return, receive personalized “Business Savings”, or special deals offered by businesses that pay Wave Accounting revenue each time a user signs up for an offer. In the two years since it was founded, Wave has found some real traction as evidenced by the fact that they’ve signed up nearly a half million customers worldwide, raised more than $19 million in funding and grown from seven employees in 2010 to nearly 80 employees today.
Wave is continuing that velocity with the announcement today of WaveApps, a combined portfolio of applications that now constitutes a single integrated solution covering invoicing, accounting, payroll, payments, receipt management and other financial application requirements SMBs have. Wave is pushing the story that this centralization and integration of the different applications makes it easier for SMBs to runt heir businesses. Now I’m all for integrated applications, but it has to be pointed out that the different functional areas that Wave is integrating (and calling revolutionary) are functional areas that most accounting products include within their single solution – payroll perhaps not but the others are generally offered within one product – so the lofty claim by Wave is perhaps a little disingenuous.
In messaging this release, founder of Wave Kirk Simpson is looking to differentiate himself from other cloud accounting vendors who serve slightly larger organizations, as he points out:
There is a world of difference between the needs of a five-person company and a 55-person company.When we say ‘made for small business,’ we mean Wave is really built to work the way a small business owner wants their tools to work. This includes the one-person shops and ‘solopreneurs’ that make up more than half of small businesses in North America
This would appear to assert the fact that for these smallest of businesses, a rich ecosystem of applications is less compelling than is a tightly integrated solution – even if it is, by nature, somewhat less broad than a pick of best-of-breed solutions. They’re also strongly differentiating themselves from the freemium versions of their paid competitors’ products – Wave has free online accounting and free invoicing and receipt management – regardless of the number of invoices/receipts a business may generate.
With this release Wave is also announcing an upcoming mobile receipt scanning application that automatically converts scanned receipts into digital transactions within the accounting platform – this product will be free, but will come with a paid option for those who want manual checking of the digitization.
One of the paid services that Wave includes is payroll – for $5 per employee per month, Wave provides full payroll functionality, including direct deposit services. This is a strong differentiator from the front runner in the cloud accounting space, Xero, who only has US payroll via an integration with ADP – a service that works fine, but doesn’t have the design aesthetic of more modern products. it looks fairly probably that Xero will extend payroll to the US via it’s recently acquisition of Australian payroll vendor PayCycle but in the meant time, this is one drum that Wave will continue to beat. A mobile app for Wave Payroll will also be available early in 2013.
Wave is also introducing an interesting credit card payment facility that should simplify the acceptance of credit cards, along with clarifying the fee structure, for SMBs. Wave customers have a “pay now” option on their invoices which will let customer pay by major credit card. As expected a payment will be automatically reflected in the accounts receivable section of the ledger.
Finally Wave is delivering on the reality for most SMBs of a blurred distinction between business and personal finance. They are integrating personal financial tools that can be used as a budgeting and reporting aid on both personal and business accounts.
All these different product changes called for a rethink of UI and Wave is rolling out its new UI today as well – the UI looks really good and, I have to say, is very reminiscent of the Xero experience. No one denies that Xero really leads the space in terms of a friendly and intuitive UI, in taking guidance from Xero, Wave have done the logical thing.
Wave is a really interesting company – while some question the willingness of SMBs to use a free product and potentially let themselves in for advertising spam, the reality is that a significant part of the SMB community will be attracted to a product that is free. While other cloud accounting products might be beautiful, that beauty comes at a not-negligible cost for businesses. Wave is right to bank on a significant proportion of SMBs out there being willing to put up with a bit of advertising in return for getting free software.