Category Archives: Background


WAVE was one of 3 online accounting packages that our firm has recommended in the past.

It is a good fit for companies who don’t require bank (or credit card) accounts in multiple currencies. For those that do we recommend either:

  1. XERO
  2. QBO (Quickbooks Online)

It will be interesting to see whether the acquisition by H&R Block will have any effect on the software itself.

Wave – Xero – Quickbooks – Which is Better for Startups?

Having used WAVE ACCOUNTING for over 3 years, we were quite satisfied with it, for our small consulting practice. However we had never used it in a situation where multiple currencies were necessary. 
While WAVE does provide multi-currency capabilities, the reporting for US-denominated banks, AR or AP does not allow for reporting at run time in either the local currency or the foreign currency. This could be a factor and might lead to higher bookkeeping and review costs.
This may not be a deal breaker, but should be considered as a factor when deciding on which online service to use.

I used to say  “choose your bookkeeper NOT your accounting software”. That is probably still good advice, BUT it’s awfully difficult to hire someone for a function that you don’t fully understand.

In fact it’s just about as hard as selecting a tool for doing something you don’t know how to do. If you knew how to do it, it would be much easier to know which tool to buy.

What is a Startup Anyway?

The first thing you’ll need to consider is the kind of business you actually are – and what you’re trying to be. I’d like to refer you to another post that discusses this issue in detail –

What is a startup?

For someone at a very early stage the answer will be different than it would be for a venture-backed startup with 15 or 20 employees…

I recently read a post from an self-described “outsourced CFO” by the name of Seth David:

Now, if you’re a business owner who just wants to keep the books for a business, then you probably have no idea what I am talking about, and I’m equally certain you wouldn’t care. That is until you decided to hire someone like me—an outsourced CFO. And you do that because you want the strategic analysis and guidance. You want to take your books beyond compiling a tax return once a year, and you want to analyze the information. – Seth David, Fundera

Mr. David is right “if you’re hiring an outsourced CFO”,…

but you won’t be hiring one if your company is at a very early stage. So if you’re planning on hiring an outsourced CFO right away, ask them to recommend the software. It’s been my experience though, that most early stage companies are at least 4 or 5 years away from hiring a CFO.

In fact most “outsourced CFOs” are really more like public accountants – typically with an accounting designation and 5 or 6 clients. They mostly operate without the overhead (or regulation) of CPAs in public practice, and provide bookkeeping and accounting services at discounted or “bulk” rates.

My perspective is different than Seth David’s – primarily because my clients need tax advice (primarily for tax incentives) and need to file tax returns.


If your company is a little further along in it’s development, Seth David’s article is certainly worth a read…

quickbooks-online-vs-xero by Seth David

For a “seed stage” company – or a new “lifestyle business” with 5 or fewer employees, the volume of transactions is  really trivial. So the choice is probably simpler:

  1.  choose a bookkeeping service that meets your needs and let them choose the software
  2. choose QBO or Xero if you actually need multi-currency support (bank accounts or invoicing in US dollars – or other non-Canadian currency)
  3. if you have a bookkeeper on staff (why? – the number of transactions is trivial anyway) – choose WAVE unless the bookkeeper is experienced and has a preference – or you need multi-currrency support (see 2 above)

WAVE ACCOUNTING is 1 of 3 online accounting packages we use and recommend for Canadian small businesses.

Each of the 3 packages will function adequately for the needs of this kind of business. For me WAVE gets the nod because it is basically free – unless you need multi-currency suppoort. However the annual licensing cost for the most expensive option is only about $700 (Xero lists it’s pricing in USD). If that is a minor consideration for your business, you may want look in more detail at either QUICKBOOKS ONLINE or XERO.

In future posts we’ll discuss the different approach and business models of these 3 suppliers.

Online Bookkeeping Services

These days small businesses are faced with many different options for accounting and bookkeeping services online…

A new generation of CPA firms is even starting to get in on the act.



Note that this firm is selling year-end packages monthly that don’t actually include the bookkeeping. The price for year end work looks fair. They seem to work on the assumption that they can actually train non-accountants to do the bookkeeping themselves during the year.

It isn’t until they reach annual billings of $12,000 to $60,000 that they include bookkeeping services in their service offerings.

BENCH.CO – A Vancouver Success Story

I initially ran into BENCH when they were a New York-based startup operating as 10 SHEET. They use their own proprietary software – and all of their bookkeepers are local and have been subjected to criminal record checks.

Bench Security

The cost of their services seems very high, given their notion of what constitutes theirSTARTER or MICRO packages (STARTER below $1k – MICRO up to $7.5K in monthly transactions).

Bench Pricing

At these levels we’d expect to see unincorporated individuals whose “businesses” represent working part-time out of their apartment…I just hope that those prices are in Canadian dollars!


Less Accounting does a great job of marketing – I love the picture of Donnie Cooper with tape on his glasses. But then I’m a sucker for self-deprecating humour.

Meet Donnie

However the pricing is in US dollars and once again seems pretty high.

Less Acctg Pricing

“Businesses” that qualify for the TINY or FREELANCER plans should probably just download credit card and bank transactions and have someone summarize them once a year for their tax accountant.


Wave Bookkeeping

Depending on how quickly the cost of their bookkeeping services escalates, WAVE may actually offer the most cost effective services of those discussed in this post…









About Quickbooks Online


Like Xero, Quickbooks Online works with accountants to try to encourage us to recommend their products…

Apparently Quickbooks (online and desktop) commands 60% of the Canadian market – and it’s hard to argue with their success.


What’s more their partner program for accountants is straightforward. They simply offer 50% for accountants who pay for the plan on behalf of their clients.

QBO Review

Pricing appears more straightforward than Xero’s – what’s more they list their Canadian prices in Canadian dollars…


About Xero

XeroWe are Xero-certified partners and provide services to a number of clients who use it. I think it is a great option for clients who suit their Xero Ledger product – which is a very low-cost package ($3 USD per month) meant for very small clients. This particular package is only available from a Xero-certified partner.

Companies that require multi-currency support will need to opt for their most expensive package ($40 USD) per month. If the monthly cost is trivial for your company, this is a great package for those who require multi-currency support.

Xero and Quickbooks both work hard to get CPAs and bookkeeping firms to recommend their software and offer discounts to their accounting partners to offer their software to clients.

Xero Review Packages

Xero Review CPA Packages

It seems to us that Xero is a favorite with technology startups. By contrast, Quickbooks is more popular generally.

About Wave Accounting

Wave Logo

WAVE’s business model is a little different than most online accounting packages. Firstly the core software is free. So there’s none of the nonsense about a so-called “free trial”.

When it comes to accounting software the term “free trial” is just advertising hyperbole. In the same class as “financial statements at the push of a button”. Consider how much work it is to put a package thought its paces.

How much data do you need to enter in order to put the software to a meaningful test? Is that really free if you have to pay someone on your staff to enter and interpret the data? How many packages do you want to take for a test drive.

So if WAVE is actually free, how do they make money?

Wave Review

So WAVE likely makes most of its money on transaction processing. When you create an invoice in WAVE you can allow clients to pay online with credit cards or PayPal. They also charge for payroll and offer monthly bookkeeping services.

While we find it useful in our practice to accelerate cash receipts, you can obviously choose to simply create PDF invoices and email them to clients – and save the processing fee.

While we haven’t tried the payroll service, we typically recommend other options for payroll processing.

Wave Bookkeeping

From our perspective we think these services are rather expensive. Of course we compete with WAVE in providing bookkeeping services, but think prospective clients should get nervous when someone says services start at $199 per month (look for our upcoming post on bookkeeping services).

We also think it’s a little disingenuous to suggest that someone can learn how to do the bookkeeping  after 2 hours of training. A few days ago I did some work on a file where the CFO (a talented guy who had raised millions for the company) made some adjustments directly in the accounting software for transactions that were “too complex” for the bookkeeper.

The total revenue for the year was about $12 million. After he had finished, it was clear that revenue was overstated by $1.4 million because of his adjustments. Unfortunately he was too focused on the revenue number and didn’t quite understand the importance of the relationship with the assets on the balance sheet.

The number for one line of revenue was now correct, however a second line was overstated by $1.4 million because of a bookkeeping error. At the same time there was a “phantom” (non-existent) asset in the amount of – $1.4 million.

The takeaway is that being intelligent and well-educated isn’t a substitute for training AND experience in accounting.

Like I said, the CFO is a talented guy and does wonders when it comes to corporate finance. But he shouldn’t fool himself that he can do the bookkeeping – even if he can read the financial statements and is very “financially literate”.

For the majority of corporations with 5 or fewer employees, WAVE does a perfectly adequate job of serving as an online general ledger and financial reporting tool. It supports multiple currencies pretty seamlessly and allows bank accounts to be linked directly to your bank.

This sounds wonderfully “Artificially Intelligent” – and certainly linking the bank account to your general ledger can be a real time saver for a skilled bookkeeper. However, it can also create a real mess, really fast if you’re not experienced.

to the unskilled, “automatic” bank feeds can actually create a false expectation of accuracy

In fact we often get clients to download “CSV” (comma separated value) files from the bank at the end of the month – or whenever they need financial statements. We then import them into the software whenever we need to prepare the statements.

The notion of a direct feed from the bank, leads many people to assume that accurate financials can be printed at any time. This is almost always dangerously false – particularly when the people trying to interpret the financials are unskilled.



3 Cloud Accounting Packages for Canadian Business

Should I use online, cloud-based accounting software?

  1. Do I need accounting software at all?
  2. Who should do the bookkeeping?
  3. What are the security issues?
  4. How important is efficient collaboration with my accountant?
  5. How important is cost?
  6. Do I understand how to interpret financial statements?
  7. Do I use financial statements regularly (monthly or quarterly) as an aid in managing my business?

Almost Certainly the Answer is YES!

(if your business is incorporated that is…)

In this post we’ll discuss why.

1. Do I need accounting software at all?

Well no, but you need to keep records. Clearly you could do everything manually and use spreadsheets.

In fact as CPAs we do that ourselves. To facilitate after-the-fact bookkeeping for our clients, we built our own write-up tool for client work. We also use it to facilitate the preparation of working paper files for year end work. But that’s not something any small business should consider until they reached the point of hiring a full-time professional accountant for their business. Typically that means until you’ve become an SME (“Small to Medium Enterprise” 50+ employees).

Even though we generally do all of the bookkeeping for our own individual practice segments using spreadsheets, we still use online accounting software for each segment as a general ledger, for invoicing and to simplify internal reporting.

So theoretically all of your bookkeeping and accounting could be done with a spreadsheet – but it would certainly be inconvenient.

In any business, inconvenience translates as “higher cost”

So the time spent building your own idiosyncratic bookkeeping system using a spreadsheet – and then explaining it to your  accountant or anyone else that needs to rely on it, just doesn’t make sense.

YES – you should keep your accounting records in a cloud-based accounting system. This is true even if you only update the accounts once a year…

2. Who should do the bookkeeping?

i.e. do we have the skills, time and desire to do all of the bookkeeping locally?

Bookkeeping is actually a skilled trade. On occasion people learn by doing, and as a result there are many many people who have picked up  many of the skills of a bookkeeper over the years. The problem with hiring someone to perform a function that you don’t understand, is that you will have difficulty first in defining the job and second, in evaluating your employee’s effectiveness.

often there’s very little accounting to do in a business that is just starting up anyway

Another key consideration is that there often is very little accounting to do in a business that is just starting up. So the investment of time to get sufficiently skilled to either perform the bookkeeping function – or to supervise it – is most often not cost-effective.

In fact many new businesses won’t have more than 30 or 40 hours of actual bookkeeping work in their first year of operation – if you can find the records that is!

Record-keeping, payroll and invoicing are really the key issues for any new business

If you don’t keep good records, no one can do the bookkeeping effectively. The good news here though, is that with the way our economy has moved to digital, there is better access to electronic records than there ever was with manual records. This makes it easier to retrieve and share transaction data with others. However, having a simple and effective process for managing and accessing records is critical – regardless of how the accounting function is performed.

Most CPA firms are aware that a good bookkeeper can be hard to find. Some so-called “certified” bookkeepers are excellent. However certification isn’t a guarantee of suitability.

For all of these reasons we recommend outsourcing the bookkeeping for your small business – especially at a very early stage. Instead concentrate on the record-keeping, payroll (if applicable) and invoicing.

Not that much bookkeeping at an early stage anyway

Record-keeping, payroll and invoicing are more important (we’ll discuss 2 options for small business payroll that are free – in a later post)


3. What are the security issues?

Most people that are reluctant to use cloud-based accounting software probably have issues with data security. While that is understandable, any time you hire an employee or outsource work to someone other than yourself you introduce a certain amount of risk.

Any bookkeeper or CPA firm could in theory, steal confidential financial information from your company. That is true whether you work online or use desktop accounting software on a local machine.

Identity Theft is Probably the Biggest Risk for your Data – but isn’t related to your Accounting Data

Identity theft is a risk, regardless of whether you use cloud-based accounting software or not. Thieves have actually stolen identities by stealing mail from post boxes or other so-called secure systems. What is most important in my view, is to carefully safeguard online banking passwords and access.

For the most part it’s less dangerous to use online accounting software than it is to have a FACEBOOK page or a company website. You’re probably more likely to have security breached by a supplier or service like EQUIFAX over which you have no control.

Accounting data for most small businesses isn’t nearly as valuable to thieves as data from large firms. Some years ago I used to buy computer hardware from a supplier named NCIX. After the company went into bankruptcy, it turns out that someone sold computer hardware with NCIX’s own customer data. That put my credit card data at risk.

Luckily my wife scans our credit card info like a hawk, making sure that all charges are legitimate.

Loss of Data is a Bigger Risk than Data Theft

(at least as it relates to your accounting data)

If you store your data on a local hard drive, it is very susceptible to hard drive failure. If you don’t backup your data, you risk the loss of your data. If you do back it up, the chances are you are using cloud-based storage anyway:

  • Dropbox
  • GOOGLE Drive
  • iCLOUD
  • Microsoft OneDrive

Also Consider the Viability of the Software Publisher


When it comes to data security, it is important to consider whether your software publisher is adequately financed and will stick around long enough to safeguard your data. That is one reason we recommend only 3 packages:

Wave Logo

  2. XERO


Using cloud-based accounting software will improve your ability to collaborate effectively with bookkeepers and your accountant. In reality your data will be more secure – if you use software that is well-established

4. How important is efficient collaboration with my accountant?

There is no question that cloud-based accounting software is much more efficient when it comes to collaborating, than desktop applications. As a CPA not only do I have immediate access to detailed bookkeeping, I can easily post year end adjusting entries to my clients’ systems, and produce detailed working papers much more easily.

When it’s much easier for your accountant- and for you – that also translates to lower cost.

5. How important is cost?

The cost for the cloud-based accounting from free to thousands annually, depending on which package and subset of services you select.

We use WAVE ACCOUNTING for one of our segments. The software itself is free. However we facilitate online payments using WAVE’s interface. That can easily cost us thousands in a year. However it also serves to accelerate the receipt of cash. For another segment we use PAYPAL for invoicing. The software is free, but the charge for payment processing is about 3% – similar to WAVE’s charges.

Cost is important particularly at an early stage, however determining what it will cost will depend on which package, which version and what specific services you use.

6. Do I understand how to interpret financial statements?


7. Do I actually use financial statements to manage my business?

One of the justifications for the use of any accounting software is to have:


As a CPA in practice – and as any professional financial controller will tell you – there is always work to do before the financial statements are accurate. That is what professionals mean by doing the MONTH END.

In our practice we manage the work during the year and don’t look at the financials except for compliance purposes. That works for us, but every business is different. You need to ask yourself these questions:

i. If we got an accurate balance sheet and P&L monthly, would we review it monthly?

ii. Would we change our behaviour as a result of that review?

Clearly you need a sense of how things are going on a regular basis. Most of us monitor the cash receipts, payments and sales regularly.

The frequency with which you would actually review and evaluate your financial statements should help you decide how frequently you need to do a month-end (i.e. monthly, quarterly or annually). The more frequently, the more resources (aka “money”) you need to allocate to the bookkeeping and accounting functions.

Cloud Accounting