H&R Block’s financial technology innovation arm, Wave, is adding new accounts receivable features to its small business bookkeeping software.
In July, Wave plans to add new AR management features, including an invoice list view for identifying customers with unpaid invoices. A new customer list view will let users see how much any customer owes, without needing to sort through multiple invoices. Customer profiles will provide a single view of the information needed for managing customers. An invoices tab will give in-depth information on customer billing and payment history. A customer contacts feature will offer the ability to attach multiple contacts to one customer. An activity tab will supply a view of all the business’s interactions with any customer.
The extra AR functionality is the latest step in Block’s efforts to expand beyond tax prep to more of an all-around bookkeeping and financial management system. But unlike other accounting software companies, Block isn’t positioning the software for accounting firms to use.
“Our view is that oftentimes accounting firms and bookkeepers will have five or 10 customers who are kind of a bad fit for them,” said Wave CEO Kirk Simpson. “They show up with a shoebox with a bunch of receipts and they want them to get out to tax. And there we have a favorable relationship with accountants who then recommend Wave so that they can interact with them with better records in place. But we don’t do anything particularly working with any of the CPA organizations. That is a market where Intuit has done very well, and our view is that we will build the software that is required. We will always have good relationships with accountants and bookkeepers, but we’re very focused on the small business owners themselves.”
Kirk is a threetime entrepreneur who ended up with $40,000 in debt after his first venture. Before founding Wave, he ran two outdoor adventure companies. Block acquired Wave Financial in June 2019 for $405 million in an all-cash deal. Last year, he and his team launched Wave Money, a combined banking, payments and bookkeeping system for small businesses.
“Wave started in 2010 in what some might refer to as micro small businesses with zero to five employees,” said Simpson. “So many of them were still using spreadsheets, shoeboxes, Word docs and that kind of stuff, and we wanted to take them off the sidelines and get them into software. So we built invoicing and accounting software really aimed at that small business owner. We also made the software free, so no reason to stay in Excel spreadsheets and Word docs and shoeboxes when you can use Wave software. Fast forward to today, and we have hundreds of thousands of monthly active users on the platform, and we’ve embedded a lot of financial services products within that software, for example, payments on invoices, so that you can get paid faster. On average our users get paid three times faster when they use Wave Payments. One of the things that we’re most excited about is Wave Money, which is our bank account product that we’re putting at the core.”
Wave has been adding more features, tying Wave Money into the larger system so a user can send out an invoice to their customer and get paid through Wave Payments. “They have access to their funds in 15 seconds within the Wave Money account, really speeding up their cash flow, and then be able to spend on the card and have it immediately booked within our accounting product,” said Simpson.
As part of his deal with Block, Simpson was allowed to continue to run Wave in an entrepreneurial way. “There are a couple of different models for acquisitions of this type,” he said. “One is to buy and integrate very deeply, and the other is to buy and really let that culture, and the people that you acquired through it, to continue to execute on the vision. Block was very clear from the get go, and I was clear from the get go, that we were looking for the second of those, and they’ve been very true to their word over the last couple of years in letting Wave operate very independently. In fact, our move to put Wave Money at the core of what we do was driven by the management team. We’re very independent. We’ve got the best interests of small business owners in mind and that really continues to be our driving principle.”
In March, though, the company announced a tax integration with Block. “This year we launched a seamless integration for tax filing, such that with a click of the button, your bookkeeping records in Wave would be synced automatically into H&R Block’s tax products,” said Simpson. “We got a lot of great feedback from customers about making it easier to go from their accounting software into the tax software.”
The upgraded accounts receivable module is aimed at sole proprietors and small businesses. “We have hundreds of thousands of users using us for invoicing, sending almost $30 billion of invoices through our platform, and the goal with some of these new features is how do they at a glance better understand their interactions with their customers, who owes them money, how do they send reminders to get paid faster, all of these kinds of features to give them really more professional software than they’ve been used to really upgrade their opportunity to manage their accounts receivable,” said Simpson. “We all know there’s been a lot of innovation in the small business lending area, but really the number one thing that Wave is focused on is let’s try and help small business owners avoid having to get a loan in the first place, which means getting them paid faster for the work they’ve already done.”
Unlike other small business accounting software makers, Wave largely avoided adding features for Paycheck Protection Program loans. “We felt like that area was well served by other providers, and we stayed focused on where we think we can uniquely add value around accounts receivable, management payments and putting money at the core to make it easier for them to manage their finances,” said Simpson.
The software is aimed more at the small business owner than the accountant. “There’s been a lot of innovation in the software space in this realm, very much focused on the accountant themselves, and our goal from day one, based a lot on my experiences of being an entrepreneur, is that this domain can be very complex for small business owners,” said Simpson. “They don’t have a lot of knowledge here. They feel out of depth in a lot of ways. They might have the financial literacy required to make some of the good decisions around their business, and our goal really is to build software aimed at the small business owner, such that they can take better control of their financial life. We’re not built for accountants. We stay focused on the small business owner who wants to take advantage of modern software to make this stuff easier. That’s always been our focus, and very much by my own experience being a small business owner.”
Nevertheless, many of the users end up being accountants and bookkeepers who work at the small businesses or with the small businesses. “We very much listen to accountants and bookkeepers in terms of what they’re looking for,” said Simpson. “We are a true double-entry accounting system. We have user permission levels such that a small business owner can invite their accountant or their bookkeeper into the software to collaborate with them. All of those things are really important to us.”
With the new improvements, Simpson will still be aiming the software at Wave’s core users. “At the end of the day the focus is on the small business owners who we all know can take better control over their own financial life,” he said. “That’s really what we’re here for: the new opportunities that stem from building a bank account that can sit at the core of software providers like Wave, and how we can really change the game for small business owners, and make things much more seamless to go from getting paid to being able to spend your money, account for it all in one place and get it all out to tax. That’s really what we’re all about.”