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).
- Time tracking and projects.
- Expenses and the bank feed.
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 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.
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.
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.
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.