Cloud Accounting Small Business

FreshBooks Accounting Software Video Review

Written by Greg Lam

As a part of The Sleeter Group’s ongoing research and in connection with our just-released ebook – Online Accounting Software: Finding the Right Match – I’ll review FreshBooks Cloud Accounting software via video. Complete details about FreshBooks can be found in the book.

This FreshBooks accounting software video review covers the following:

  • Does FreshBooks have the accounting basics? (Unfortunately, no).
  • Invoicing.
  • Time tracking and projects.
  • Expenses and the bank feed.
  • Reports.
  • Recommendation.

FreshBooks added “cloud accounting” to its name back in 2012, but really, FreshBooks is cloud invoicing software.

When I review accounting software, I always check to see if they have the accounting basics: accrual accounting, good control over the chart of accounts, and the ability to create journal entries. FreshBooks doesn’t have any of this.

What does this mean for small business owners? It means you can’t fully use it to accurately produce profit & loss and balance sheet reports. Sure, FreshBooks has these reports that you can generate, but because FreshBooks only focuses on tracking income and expenses, and not assets, liabilities, and equity (or in other words bank accounts, loans, and owner contributions), the reports won’t be usable without manipulation. So, you’ll need to take the data in FreshBooks to other accounting software in order to verify the data, or, take the information to an accountant who can.

If FreshBooks can’t produce accurate accounting reports, what can it do?

Some things you can do are create clients and invoice them, create projects and track time, and have a team of staff. And all those things are what FreshBooks excels at. In addition, FreshBooks’ interface, whether in the web or mobile app, is friendly and simple to use. The web app has a lot of getting started videos throughout, which are fun and helpful.

Invoicing

Invoicing is simple enough to do, and you can invoice based on items or time. Since FreshBooks is cloud based invoicing, there is a requirement that the customer has an email address. If your customer doesn’t have an email address you can bypass this by putting in your own email address.

One of the key features of the online invoices is that customers can also pay online. With FreshBooks, you have a variety of options, like PayPal, Stripe, Authorize.net and Beanstream (to name a few of the most prominent ones). Being able to use multiple payment processors used to be unique to FreshBooks, but nowadays most online accounting software provide this.

Again, since FreshBooks is online invoicing, you have limited options. You can send the invoice via email or regular mail, but both need to be done through FreshBooks. This means you can’t simply save the invoice and download or print a PDF. There are workarounds for this, but it’s not as easy and simple like in other software. Of course, the reason behind sending invoice through FreshBooks by email is that it can provide tracking, payment and customer portal features.

What’s unique about FreshBooks’ online invoicing is that FreshBooks gives your business a customized URL. So when a customer clicks the link, it takes them to a customer portal. Most software require customers to create an account to access something like this, but with FreshBooks it’s not necessary. All you need is the email with the link. What’s great about this is that your customer can see all their invoices, pay multiple outstanding invoices at a time, see a history of their payments, see and use their credits, and even dispute the invoice. I find the dispute feature useful since it provides a record and mechanism for a back and forth between a business and its customers. This communication system also works nicely for estimates, where a user can request changes.

Overall, FreshBooks has the most full featured online invoicing and customer portal system out of all the online accounting software I reviewed. And I’m glad it does, since that’s primarily what FreshBooks does.

Time Tracking

Another solid feature of FreshBooks is its time tracking. Projects also falls under this as well, since you create projects that are assigned to clients which you can have tasks for.

You can either track time by logging hours after the fact or you can use the timer to track them as you go. The useful thing about time tracking in FreshBooks, is that the mobile app has the same features and all of this is also available for staff to use.

Once you log your hours for tasks, it’s easy to bill them out to clients by generating an invoice. You can also bill clients for expenses that you paid for on their behalf. And that brings us to FreshBooks’ expense capabilities.

Expenses and Bank Feeds

Where FreshBooks starts falling short is with Expenses.

First of all, there’s no accounts payable. This means that if you purchase items from vendors that you pay for at a later date, there’s no way to track these unpaid bills in FreshBooks.

Expenses can be imported via bank feed, but since FreshBooks has no ability to match the imported bank transactions to those already entered, you can end up entering transactions twice. There is a duplicate transactions detection system, but this is trying to fix errors after the fact, instead of doing things properly the first time.

Another problem with the bank feed is that it can only import expenses. This means no payments or deposits will be imported. Because of this, no reconciliation of your bank account to your FreshBooks records can be done.

Reports

If you go the reports, you won’t be able to trust some of the figures. This is because the income and expenses entered into FreshBooks have not been verified by a reconciliation, and because FreshBooks doesn’t have asset, liability, and equity accounts. So the two key reports in accounting, the profit and loss report (which shows the profitability of a company) and the balance sheet (which shows the net worth of a company) can’t be accurately generated. In fact, the balance sheet report is a DIY form that you’d fill in yourself.

Export of Data

To help with the fact that FreshBooks doesn’t have all your financial data, FreshBooks allows you to export your transactions via a IIF file into QuickBooks Desktop. See our article that digs into this feature. While the export sounds good, a major problem with the export is that the data is not reconciled. So whoever is working with the data in QuickBooks has to trust that it’s okay or spend quite a bit of time trying to rework and reconcile the data. Perhaps with small businesses that only use a single bank account and credit card for expenses this may not be too bad, but for business who have multiple accounts and pay for things personally, this could quickly become an accounting quagmire.

Recommendation

If you use FreshBooks for invoicing only, it can be a great tool, but I have issues with using it as accounting software. It’s simply not designed to function as accounting software, despite its name being “FreshBooks Cloud Accounting.” If the name was “FreshBooks Invoicing,” I’d be a lot happier; putting “Cloud Accounting” behind the name confuses users.

Projects, specifically billing out based on time spent by staff and contractors, are a strong part of FreshBooks. If that’s the primary focus of your business, FreshBooks offers an easy-to-use platform. A bit of a disappointment with projects is that the billing out of expenses isn’t handled in the best way. Reports can’t break out the profit margin on projects after factoring in time and expense costs.

As mentioned, FreshBooks has issues on the accounting end since accounting data is both unreconciled and missing. So reworking of the data is going to be necessary to truly produce an accurate report of a business’ financial performance and standing.

But again, as an invoicing tool for client based businesses, FreshBooks is a decent choice.

For a detailed analysis of FreshBooks, please check out my ebook called Online Accounting Software: Finding the Right Match. And for more videos like this, please subscribe to the Sleeter Group Youtube channel. I’m Greg Lam with the Sleeter Group and I’ll catch you on the flip side.


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About the author

Greg Lam

Greg Lam is a passionate small business guy who loves technology and automation. He holds a BBA from Simon Fraser University, Canada. He's a Certified QuickBooks ProAdvisor, Certified Xero Partner, and Kashoo MVP. His business interests are focused on online accounting and how it can be used to streamline and automate a company’s accounting processes. He currently lives in Tokyo, Japan.

Greg operates the Small Biz Doer website, an "Entrepreneur's Guide to Small Biz Bookkeeping." He is the author of Online Accounting Software: Finding the Right Match, published by The Sleeter Group.

Connect with Greg on Twitter, Google Plus, YouTube, LinkedIn, or Facebook.

6 Comments

  • Greg you say, “If you use FreshBooks for invoicing only, it can be a great tool”. You’re saying conditioned on X only, then maybe Y. You later describe it as “decent” for invoicing. The main problem with how you marginalize Freshbooks in this review is your summation is out of step with the real world and you are not giving Freshbooks its earned and deserved due.

    FreshBooks has a user base of 10 million Greg (30x the user base of Xero @ 330,000) they must be doing something exceptionally well, no? But a reader would never know this fact and truth in reading your review. Though I like how comprehensive your writing is, at the end of the day your summation does not reflect the real world.

    • I’d say it is a fair enough evaluation – it just is not a full accounting product. For people who don’t want a full accounting product, or find that their accounting product doesn’t provide the kinds of services that FreshBooks provides, it is a good product. But, definitely NOT a full accounting product.

    • Hi JDeagen,

      A very large amount of small businesses use Excel to do their accounting as well. It can be a tool to do accounting, and if the user knows what they are doing, it can suit the needs of a small business. But, I don’t call Excel accounting software.

      I think the same applies to FreshBooks. You can use it for accounting, but you really have to understand what it can and can’t do. I know I couldn’t use it to do small business accounting without having a spreadsheet or accounting software used in parallel to fill in the gaps. I think some businesses simply use the FreshBooks numbers and say close enough.

      I review the software, not the user base. So I look at the software and try to give the pros and cons. If there was software out there that had a user base of 100 but I thought was better than what I’ve currently reviewed, I would do it.

      • Charlie & Greg, I made no effort to claim Freshbooks is a full accounting product. You are both speaking to the wrong point. My bone of contention with Greg is Freshbooks as an invoicing tool for client based businesses and his summing it up as “decent”.

        Square that with a user base of 10,000,000. Both can’t be right as a “decent” invoicing tool for client based businesses DOES NOT have a user base of 10,000,000. In other words, there’s something appealing about Freshbooks clearly exceeding it being viewed as ‘decent’, something justifying why 10,000,000 users are out there. That is what your readers deserved you delineating. Greg, I wanted to read “why are 10,000,000 people using this invoicing tool”? And then read your personal opinion. You had an opportunity to explain to readers a fact about Freshbooks (why it’s popularity has reached 10,000,000 users) and you did not do it. Readers lose when you don’t.

        It (your review) does not “add up” or “reconcile” with the real world and that’s a problem, it shows you don’t get it. Again, they both can’t be right, Freshbooks as an invoicing tool fairly characterized as “decent” yet having a user base of 10,000,000.

  • Hi Greg,
    Thank you for this in-depth article about Freshbooks. Very useful since I’m looking around trying to find the best invoicing app for my small business. So far, I’m debating between Freshbooks (it do looks great) and Invoicera, an interesting invoicing and time tracking app with one huge advantage, it’s completely free to use!
    I think I’ll wait until you publish your Invoicera review before I take a final decision. I’m really anxious to see what you think about this app.
    As I mentioned earlier, I have a very small business with limited needs so I would prefer to go down the free road.
    Regards,
    John

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