Bookkeeping basics
Which Bookkeeping Software Should You Use? Wave, QuickBooks, Xero, and FreshBooks Compared
A plain-English comparison of the most common bookkeeping tools for small business owners — which one fits your business type, what each costs, and the one mistake to avoid when setting up.
Written by Matt Reese, CPA · 6 min read · Published April 2026·Share on LinkedIn
Key Takeaways
- Wave is genuinely free and works well for simple service businesses — it's not a 'lite' version.
- QuickBooks Online is the industry standard and the safest choice if you're not sure — most CPAs know it well.
- Xero is accountant-preferred for its multi-user access and clean bank reconciliation workflow.
- QuickBooks Self-Employed is NOT the same as QuickBooks Online — it's limited to Schedule C freelancers and can't grow with you.
The choice matters more than people think
Your bookkeeping software is the foundation of everything financial in your business. Your P&L lives in it. Your tax return is built from it. If your CPA requests a report, it comes from it. Picking one that doesn’t fit your business means either switching (painful) or working around limitations for years.
The good news: the right choice for most businesses is obvious once you know two things — your business complexity, and your accountant’s preference.
The quick guide: who should use what
| If you are... | Use this |
|---|---|
| A solo freelancer or sole prop, simple Schedule C, no employees | Wave (free) or QuickBooks Online Simple Start ($30/mo) |
| A solo service business planning to grow or eventually hire | QuickBooks Online Essentials ($60/mo) or Xero Starter ($20/mo) |
| A service business with employees or an S-corp | QuickBooks Online Plus ($90/mo) or Xero Standard ($47/mo) |
| A product-based business with inventory | QuickBooks Online Plus ($90/mo) — best inventory tracking |
| A restaurant, retail shop, or franchise | QuickBooks Online Plus or Xero — ask your CPA first |
| A freelancer who invoices clients and needs a mobile app | FreshBooks ($19/mo) — best invoicing UI, limited accounting depth |
| A business where your CPA will be in the books frequently | Xero — best accountant collaboration and user permissions |
Ask your CPA before you sign up. A 10-minute conversation now saves months of export headaches later.
The options, one by one
Wave — Best free option for simple businesses
Wave is genuinely free — not a trial, not a watered-down version. The bookkeeping and invoicing are free indefinitely. They make money on payment processing and payroll add-ons.
Good for: Sole proprietors, single-member LLCs, freelancers with straightforward income. Clean bank transaction import, decent P&L reports, functional invoicing.
Not good for: Inventory, multiple users (CPA access is clunky), businesses that outgrow Schedule C. Many accountants don’t have Wave integrations and will ask you to export to Excel — which works, but creates friction.
Cost: Free for bookkeeping. $40/month + $6/employee for payroll in most states.
QuickBooks Online — The industry standard
QuickBooks is the default answer for a reason: it’s what most CPAs, bookkeepers, and financial advisors know. Bank connections are excellent, the P&L and Balance Sheet reports are solid, and there are thousands of integrations (Shopify, Square, Stripe, Gusto, etc.).
Simple Start ($30/mo): One user. Income and expense tracking, invoicing, bank feeds. Good for a solo freelancer.
Essentials ($60/mo): Three users. Adds bill management and time tracking. Good for a growing service business.
Plus ($90/mo): Five users. Adds inventory tracking, project profitability, and budget vs. actuals. The right tier for most owner-operated businesses with employees.
Not good for: Businesses where the owner will never look at it — QuickBooks has the most features but also the most to get wrong if you set it up without help.
QuickBooks Self-Employed is a trap
Xero — Accountant-preferred, best multi-user access
Xero is common in accounting firms because its collaboration features are excellent — you can give your CPA full access, your bookkeeper access, and yourself access without juggling logins or paying per-user fees the way QuickBooks does.
The bank reconciliation workflow is cleaner than QuickBooks, and Xero’s rules engine for categorizing recurring transactions is more powerful. If you’ll have a bookkeeper doing your books, they may prefer Xero.
Starter ($20/mo): Limited transactions (20 invoices/month). Only for very simple businesses.
Standard ($47/mo): Unlimited transactions, payroll add-on available. The right tier for most businesses.
Premium ($80/mo): Adds multi-currency. Only if you bill clients in foreign currencies.
Not good for: Businesses that need robust inventory (QuickBooks Plus wins here) or owners who want to do everything themselves without accountant guidance (QuickBooks has better self-service resources).
FreshBooks — Best invoicing, limited bookkeeping
FreshBooks is built primarily for service businesses that invoice clients — graphic designers, consultants, attorneys, photographers. The invoicing and client portal features are excellent. The mobile app is the best of the group.
The trade-off: FreshBooks is not a full double-entry bookkeeping system. It tracks income and expenses well but produces simplified financial reports. Many CPAs find it incomplete at tax time and ask clients to export data or switch.
Cost: $19/month for 5 clients. Scales by client count, which is an odd limitation for growing businesses.
Best for: Freelancers and service professionals who prioritize beautiful invoices and client experience over deep accounting features.
Full comparison
| Feature | Wave | QBO Simple Start | QBO Plus | Xero Standard | FreshBooks |
|---|---|---|---|---|---|
| Monthly cost | Free | $30 | $90 | $47 | $19+ |
| Bank feed / import | ✓ | ✓ | ✓ | ✓ | ✓ |
| Real P&L and Balance Sheet | ✓ | ✓ | ✓ | ✓ | Limited |
| Invoicing | ✓ | ✓ | ✓ | ✓ | Excellent |
| Payroll integration | Add-on | Add-on | Add-on | Add-on | Add-on |
| Inventory tracking | ✗ | ✗ | ✓ | Limited | ✗ |
| Accountant access | Limited | 1 accountant | 5 users | Unlimited users | Limited |
| Mobile app quality | OK | Good | Good | Good | Excellent |
| CPA familiarity | Low | High | High | High | Medium |
| Good for S-corp | No | No | Yes | Yes | No |
The one mistake everyone makes
Setting up the software and never going back to it. The software doesn’t do anything unless transactions are categorized. Uncategorized transactions pile up until it’s a crisis at tax time.
The habit that actually works: spend 20 minutes on the last Friday of every month reviewing and categorizing that month’s transactions. Every transaction gets a category. Everything is reconciled to your bank statement. That’s it. 20 minutes, once a month, prevents the entire scramble.
What your CPA actually wants
When your CPA asks for your books at tax time, they want one thing: a QuickBooks or Xero file (or accountant export) where:
- Every transaction is categorized
- Bank accounts are reconciled through December 31
- There’s no “Uncategorized Expense” or “Ask My Accountant” line items
- Owner draws are coded as equity, not expenses
A clean set of books means a faster tax return, lower CPA fees (less cleanup time), and a more accurate result. Messy books cost you money in CPA time and potentially in missed deductions.
You might also read
Chart of Accounts Explained: The Financial Filing Cabinet for Your Business
What a chart of accounts is, what the five account types mean, and sample charts for a service business and a product-based business.
BookkeepingBusiness Expense Categories: What to Track and How to Enter It in QuickBooks or Xero
The most common expense categories, QuickBooks and Xero names, and the special rules for auto, meals, and home office.
BookkeepingHow to Read a Profit & Loss Statement (With Real Examples)
A plain-English walkthrough of what a P&L actually tells you, with sample statements for a personal trainer, therapist, salon, and franchise restaurant.
Frequently asked
Questions owners actually ask
- Does my CPA have a preference?
- Ask before you sign up. Most CPAs work fluently in QuickBooks Online and Xero. Some have a strong preference for one. If your CPA uses Xero exclusively and you set up Wave, you're creating friction at tax time. A 10-minute conversation saves months of export headaches.
- Can I switch later if I pick the wrong one?
- Yes, but it's annoying. Switching mid-year means exporting your data, re-mapping categories, and reconciling again in the new system. Switching at year-end (after your CPA closes the books for the prior year) is much cleaner. Pick the right one the first time if you can.
- Is QuickBooks Self-Employed the same as QuickBooks Online?
- No — and this is the most common mistake new business owners make. QuickBooks Self-Employed is a simplified mileage-and-expense tracker that feeds into TurboTax for Schedule C filers. It has no chart of accounts, no real P&L, and no payroll integration. Once you hire an employee, form an LLC, or want a real set of books, you'll have to start over in QuickBooks Online. If you're serious about the business, skip QBSE.
- Do I need the paid version of Wave?
- Only if you want payroll (Wave Payroll is $40/month + $6/employee in most states, or $20/month for self-service). The bookkeeping and invoicing features of Wave are free indefinitely — no trial, no upgrade prompt after 30 days. They make money on payment processing (2.9% + 30¢ per transaction), not the software subscription.
Take the next step
Turn tax questions into a plan. Talk with Matt or see how we work with operating business owners.
Educational content only.This article is for informational purposes and does not constitute tax, legal, or investment advice. Every owner’s facts are different; consult a qualified CPA and advisor before acting. Tax and accounting services are provided through Matt Reese, CPA; investment advisory services are provided through Measured Risk Portfolios, a registered investment adviser. Matt Reese, CPA and Measured Risk Portfolios are separate entities; clients are not required to engage both.