On the 1st of December, many Africans like myself received an email from Wave Accounting that it’s pulling out from all countries outside North America.
Wave Accounting is a Toronto-based company that provides free invoicing & accounting software.
Founded in 2009, Wave has over 3.5 million users all around the world. In 2019, it was acquired by H&R Block, a listed company operating nearly 12,000 retail tax offices in the US, Canada and Australia.
Although Wave, as it’s also called, has a large user base, most users use the service free. Wave makes money from a minority of its users who use its additional payroll function (only available in US & Canada), and more recently it’s neo bank, Wave Money — a bank account with built-in bookkeeping.
Over the years, Wave has grown in popularity in Africa. It’s seen as one of the easiest accounting tools available to freelancers and entrepreneurs, who often first come in contact with it through the need to invoice their customers.
When TechCabal reached out to Wave to learn about its operations in Africa, Wave made it clear that it couldn’t provide any more insights other than what exists online. It went on to say its expansion into the African market happened organically as awareness of its software grew over time.
In an email to its customers, Wave’s co-founder and CEO, Kirk Simpson pointed out that the increase in Wave’s popularity and functionality has meant that the resources required to support it have also increased, in addition to being constrained by new legislations like Open Banking in Europe and the UK.
He said, “To continue delivering a product that meets our standards, it’s become clear that we need to adapt our approach. In simple terms, we’ve realized we need to change the way Wave allocates our resources and focus.”
Due to these reasons, Wave would focus on North American customers; it’s paying customers.
What does this mean for its users in Africa?
Although there can be no new account created from outside North America, Wave says current customers in Africa and other parts of the world can still use their accounts and should expect to do so until otherwise stated.
It also advised those wanting to transition to other accounting software that it has partnered with Zoho Books, another cloud-based accounting software, providing a special offer for its customers to transition seamlessly from Wave to Zoho Books.
But unlike Wave, Zoho Books isn’t free. Its lowest plan is $9 per month.
This decision by Wave has sparked conversations around whether there are alternatives to Wave Accounting built by Africans.
These options aren’t as sophisticated as or free like Wave but they sure are a good place to start.
The connection between bookkeeping and financial health
Africa has an estimated population of more than 1.3 billion people that is growing at over 2 per cent annually. A significant portion of this population run or work for Small and Medium-sized Enterprises (SMEs), as 90% of all businesses in Africa are SMEs.
Many of these SMEs/startups see funding as one of their major challenges, but to ascertain the funding needs of companies, there’s a need to first understand how a company is performing financially or expects to perform.
A survey on local entrepreneurs in South Africa found that many of them practise bookkeeping manually and do not complete the bookkeeping cycle. Worse still is that their incomplete financial records is the basis of their business decisions.
The exit of Wave and the absence of suitable alternatives could mean that many entrepreneurs in Africa who do not like the burden of managing their finances could return to manual or no bookkeeping.