The Small Business Doer

Ethics Statement: Small Biz Doer is not paid to write about companies and there are no affiliate links in the article below. The opinions below are solely our own. Read the full ethics statement here.

How this review works

This FreshBooks review was done by me, Greg Lam. I own the Small Business Doer website and my goal is to help small business people. The review is my own personal opinion and I was not paid by the manufacturer to write it.

I’ve been a small business owner since 1998. I have a degree in business from Simon Fraser University in Burnaby, B.C. (Canada). I’ve been doing bookkeeping for myself and others since 1998, primarily with QuickBooks. I’m also a certified QuickBooks Pro Advisor.

I am currently comparing various online accounting software and will write a review on each of them as I go along.

This review of FreshBooks was written on September 4th, 2012. The date is important to note, since software changes so quickly.

I spent about 25-30 hours using the software and writing this review. I attempted to import a trial balance ending December 31, 2011 from my QuickBooks Accountant Edition 2012 Desktop software. I also tried to enter and reconcile all the transactions for one month. I say attempted and tried because FreshBooks, while being re-branded as FreshBooks Cloud Accounting, is not full-fledged online accounting software with charts of accounts and bank reconciliations. I didn’t expect FreshBooks to be able to do those things, but with the re-branding and keeping my criteria the same for all companies, I’m judging FreshBooks as online accounting software (as opposed to online invoicing software, which is really what FreshBooks is).

I’ve decided to include all the notes that I created as I used the software myself to enable potential users to follow along, see the errors I made and to benefit from my own discoveries. These notes can be found in the setup and walk through notes section of this review.

If there is anything that I’ve said that is inaccurate or false, please let me know so that I can update the article.

Topics

1. introduction
2. user interface
3. accrual accounting
4. double-entry accounting
5. chart of accounts
6. reconciliation
7. importing and syncing data from bank
8. data import
9. data export
10. auto entry of data
11. reporting
12. taxes
13. document attachment
14. multi-currency
15. invoicing
16. payment processing
17. payroll
18. inventory
19. integration
20. mobile app
21. other features
22. support / help documentation
23. improvements
24. country it’s made in
25. price
26. recommendation
27. setup and walk through notes

go back to top

1. introduction

You can check out FreshBooks at http://www.freshbooks.com/.

freshbooks home page

You can signup for 30 day free trial, no credit card required.

FreshBooks is based out of Toronto, Canada. An August 21st, 2011 open letter by CEO and c0-founder Mike McDerment states that:

Today if we look at just North America alone, no one except QuickBooks Online has more online paying subscribers than FreshBooks, making FreshBooks the #1 cloud accounting specialist for small business owners.

FreshBooks had been always about online invoicing, but in that open letter, declared itself “cloud accounting”. Using that terminology, I will judge FreshBooks as a “cloud accounting” (online accounting) software provider.

I notice that in the above screen shot of their home page it says “Hello to Cloud Accounting”. Under that it’s “Join over 5 million people using FreshBooks to make billing painless”. So, a bit of the new, a bit of the old.

go back to top

2. user interface

FreshBooks has a fairly clean interface and look.

All your navigation can be found in the top-right grey navigation menu, the main blue navigation menu, and the sub-menu below the main menu.

Your “Overview” (Dashboard) contains a snapshot of your activities as well as links to help getting started and creating new things.

dashboard (overview)

By clicking on the “New” button, you can create anything you’d want to in FreshBooks: Clients, Invoices, Estimates, Expenses, Payments, Projects, Support Tickets.

"new" button lets you handle most everything

I noticed while entering data that using my keyboard only for entering invoices or expenses was not as fast as with other online accounting software. For example, when choosing a category while creating an expense I couldn’t hit TAB to select the “Meals & Entertainment” category (as seen in the screen shot below). I had to either press ENTER than TAB or use my mouse to click on “Meals & Entertainment” in order to select it.

data entry is missing some keyboard shortcuts

In other accounting software, I can hit TAB and the selection will be entered.

UPDATE: I didn’t initially realize that “Meals & Entertainment” is a sort of master category, and if I select a sub category “Restaurants/Dining” I can indeed use tab to select an item from a drop-down box. After further testing, sometimes TAB works and sometimes it doesn’t. I don’t know if this a glitch or if the TAB only works in certain situations.

Another example of FreshBooks not being quite as keyboard driven as other accounting software for data entry is entering taxes (seen in the screen shot above). For Taxes, I have to mouse click on the “Taxes” checkbox in order to open up the taxes interface. The same can be said for the rest of the check boxes in the interface.

These little keyboard entry things are not a big deal, but if you’re used to software that you can enter things simply by using your keyboard, it does slow your flow. I tried searching the help for keyboard shortcuts but couldn’t find any. There may be shortcuts that I’m unaware of, but I can’t find it in FreshBooks’ documentation.

Speed

FreshBooks, using my broadband internet connection, is basically as responsive as desktop software applications that I use. So, no complaints with speed over here.

Search / Finding Data

FreshBooks doesn’t have some universal search feature like you may find in other online accounting software. However, it does have feature specific searches, like the ability to search only invoices or expenses.

search button

Within a specific window, such as invoices, clicking on the search button will give you a detailed search interface.

invoice search interface

Tracking Changes / Undo Button

As far as tracking changes, I can’t see any way to track changes to a document, like an audit trail. However, you are able to track who entered expenses (as seen in the screen shot below) by going to Reports > Expense Report.

author of expenses is displayed in "Expense Report"

Invoices also have something called an “Invoice Autobiography” (as seen in the screen shot below).

invoice autobiography

As for undoing or restoring deleted transactions, like an invoice or expense, FreshBooks allows you to search for some deleted transactions.

deleted invoices

If you look at the screen shot above you’ll see the red arrow pointing towards “active”, “archived”, and “deleted”. If you select “deleted”, you can see all your deleted invoices and even restore them.

However, this restore feature is not available for every type of transaction. For example, time and payments can only be “deleted forever” (as seen in the screen shot below).

delete forever

go back to top

accrual accounting

Freshbooks kind of has accrual accounting. You can create invoices to be paid later and you can choose reports that are accrual based or cash based.

accrual or cash based revenue report

When it comes to entering bills that you owe for things you purchased (vendor bills / invoices), FreshBooks can only track them if your vendor also has FreshBooks and bills you through it. For the majority of people, this won’t be the case, so you won’t be able to enter vendor bills. Instead, you have enter those bills as expenses, which is cash based.

So, if you’re trying to use FreshBooks as a complete online accounting solution based on accrual accounting, it’s not really the tool.

go back to top

double-entry accounting

There is no double-entry accounting in FreshBooks. You won’t see any way to make a general journal entry to move funds from one account to another.

go back to top

chart of accounts

There is no official chart of accounts in FreshBooks. In the trial balance part of the setup and walk through notes section of this review I show how to set up Income and Expense accounts. There is no way in FreshBooks to set up asset, liability, or equity accounts.

So, you can add revenue and expense accounts, but that’s it. And, while you can set up your own revenue accounts, you’re forced to live with a default set of expense accounts (although, you do have the ability to add to accounts, you just can’t delete them).

go back to top

reconciliation

As with double-entry accounting and chart of accounts, there is no reconciliation in FreshBooks. This is because FreshBooks doesn’t allow you to create or track bank accounts.

So, there’s no way to verify your accounting records using FreshBooks.

go back to top

importing and syncing data from banks

In FreshBooks you are able to import expenses from your bank. It is important to note that it only imports expenses. So as an example, payments you make to your credit card are not imported as credit card payments since they are not expenses.

If you’re looking to import bank / credit card statements into FreshBooks with the intent of keeping track of and reconciling them, FreshBooks won’t do it for you.

To import expenses, go to Expenses > Import.

import expenses from bank statement

When I tried to import a credit card statement formatted as an OFX file, FreshBooks said it detected 11 expenses. If you look at the screen shot below, you’ll see that all FreshBooks was able to pull out was a date.

imported OFX file

I then tried a CSV file and got this error message.

CSV file import

After downloading the sample CSV file and re-formatting my data, I was successful in importing expenses from my credit card statement.

successful CSV import

While I was successful at importing that expense data, I don’t see this as being a viable solution for a lot of people. The OFX and QFX files did not import correctly, the CSV file needed re-formatting, and only expenses can be imported.

go back to top

data import

If you’re looking to import data into FreshBooks, you can do so by going to My Account > Import & Export (as seen in the screen shot below).

data import

As you can see, you can only import 2 things, clients and expenses. The information you can import is obviously limited. Even though you can import clients, you can import other types of contacts, such as vendors or employees.

A detailed look at importing clients is found in the setup and walk through notes section of this review.

A detailed look at importing expenses is found in the importing and syncing data from banks section of this review.

One other way to get data into FreshBooks is via add-ons, which is discussed in the integration section of this review.

go back to top

data export

Data export can be accessed the same way as data import, which is by going to My Account > Import & Export.

As seen in the screen shot below, you can export clients, invoices, staff, and timesheets through the data export feature.

data export

You can also export to CSV or Excel any reports that FreshBooks can create, which is found in the screen shot below.

reports that can be exported

One other way to get data out of FreshBooks is via add-ons, which is discussed in the integration section of this review.

go back to top

auto entry of data

In FreshBooks there’s very little automatic entry of data. An exception is when you upload expenses from a bank / credit statement. During the import you will have the option to associate a vendor with an expense category (this is only temporarily applied to the one import, it’s not saved for future expense entries).

apply expense category to all transactions from a vendor

FreshBooks doesn’t really recall information that you’ve previously entered. It can remember vendors and you can set up certain fields for clients, tasks, and items. But in general, if you enter something in an invoice or an expense, FreshBooks won’t remember this the next time you do the same thing.

One thing you can do in the way of automatic entry is set up “Recurring” invoices by going to Invoices > Recurring.

recurring invoices

Recurring invoices is discussed in more detail in the invoicing section of this review.

go back to top

reporting

You can find your reports in FreshBooks by clicking on Reports from the menu. You’ll have the following set of reports.

reports

Since FreshBooks only has Revenue and Expense accounts, you won’t see all the reports found in typical accounting software.

Most of the reports you can get are invoice and time tracking specific reports.

You’ll find some reports have more options than others. I was surprised to find that I couldn’t choose a date range for the “Profit and Loss” report but was instead only able to see data on a month-by-month level. This was made more surprising since I had the option to choose date ranges for other reports.

Some reports I was able to drill down on the data, which meant I could click on an invoice or number and get more detailed information. This was only true for certain types of data in specific reports though.

go back to top

taxes

Tax setup in FreshBooks is basic. You can access your tax setting by going to Settings > Taxes.

tax settings

Your tax reports are equally as basic.

tax report

You have taxes invoiced, less taxes on expenses, which gives you the net taxes that you owe. If you have multiple taxes, the report can break down the differences between each type of tax (not shown in the above screen shot).

So, yes, FreshBooks can handle taxes both on invoices and expenses, but it has very basic functionality. This may be just good enough for your needs though.

go back to top

document attachment

With FreshBooks you are able to attach documents to expenses as well as upload documents that can be viewed by clients and staff alike.

I’ll first start by showing you how the document attachment for expenses works.

attach a receipt to an expense

As seen in the screen shot above, you can attach a PNG, JPEG, GIF, or PDF with a maximum file size of 5MB.

If you want to later see the attachment, you mouse over the paper clip icon to get a small preview (seen in the screen shot below). By clicking on the preview, you’ll get the chance to download the file.

see an attachment

One thing that I liked is that you can actually search your expenses according to whether or not there’s an attached receipt. This is useful for tracking which expenses have receipts (that will act as proof in the cases of an audit).

has receipt search option

Something in FreshBooks that you may not see by default is the “Documents” tab. If you don’t see “Documents” in the main menu (the blue one), go to Settings > Permissions and add Documents to your “Administrator Tabs” (as seen in the screen shot below).

add documents to your administrator tabs

Once you have “Documents” added to your “Administrator Tabs”, you can see the “Documents” tab under the “More” tab (as seen in the screen shot below).

documents tab

I was disappointed that I couldn’t see the documents that I attached to expenses, but was excited to see that I could upload documents for clients. Since FreshBooks by default is set up to email your clients from within its software, I could see the need to be able to attach documents to the invoice emails. These documents could be things like work orders or proof of reimbursable expenses.

FreshBooks has an article on the different ways to attach a file to an invoice/estimate email http://community.freshbooks.com/support/can-i-attach-a-file-to-an-invoice-estimate-email/. There’s no simple solution but there’s a few work-arounds (such as the “documents” folder) that will let you give your clients attachments.

Here’s a quick run down of how uploading documents through the “documents” tab. Before you upload any documents, you first need to create a new folder and set permissions (as seen in the screen shot below).

document folder permissions

You’re given a list of all your clients and are able to choose the access that they have. For my test purposes, I gave one of my clients read access to my test folder. After testing with “read” access and then “read/write” access, I wasn’t able to get my test client the ability to see the uploaded documents.  When I logged in to the test client account I could only see invoices, there was no documents tab. I tried cutting and pasting various links to that I got from the documents section of FreshBooks. Some of the links would simply refresh the test client account page while others would simply not work.

When I clicked on the test folder I created I was able to upload one document at a time (as seen in the screen shot below).

uploading a document

You have to name each uploaded document. I can see this being annoying for people who have to upload many documents that are already named.

Update: If you leave the document unnamed, it’ll use the name of the file, glad I was wrong about this.

Once a document is uploaded, you can’t actually view it from FreshBooks. Your only option is to download the file in order to see it. You also have the option to “sign out file” in order to make changes and re-upload.

I can see the potential of managing your documents in FreshBooks, but the feature is not quite there yet. I find it puzzling that you can view a preview of a receipt (although, it’s a tiny preview) from within FreshBooks but you can’t do the same thing for files uploaded to the “Documents” section of FreshBooks.

go back to top

multi-currency

Multiple currencies is quite simple in FreshBooks, as stated in their FAQ article http://community.freshbooks.com/support/how-do-multiple-currencies-work-in-freshbooks/.

multiple currencies

Like seen in the screen shot above, your account has a default currency. To invoice in a different currency, you choose a different one (as seen in the screen shot below), by clicking on the small letters representing your currency.

changing currencies

Multiple currencies is only for invoices, so you can’t enter expenses in foreign currencies. You need to manually convert the expenses into your default currency when entering them.

go back to top

invoicing

FreshBooks is truly all about invoicing.

The basic functionality of FreshBooks’ invoices are the same as most other accounting software. Here’s what the invoicing window looks like.

invoice window

You can also create “Recurring” invoices for regular clients.

Where FreshBooks starts to differentiate itself is in “Time Tracking”. Time Tracking has it’s own tab in the main menu (the blue one).

time tracking

With “Time Tracking”, your staff and you can track time by project and by task. This enables you to have different billing rates for different team members as well as different billing rates depending on what type of work is being done. For example, you can bill out $100 an hour for a project manager, $50 an hour for a designer, and $20 an hour for a data entry person. FreshBooks makes it easy to track and gather data so that you can do detailed hourly billings.

Once you track all your hours spent on a project, it is easy to generate an invoice based on the times.

The unique thing about FreshBooks is that it lets your clients visit your FreshBooks website to see their outstanding invoices and pay them (providing you have online payments set up, which I’ll cover below in the payment processing section of this review).

As a system to track time, invoice, and receive payments online, FreshBooks works quite well.

If you’re looking for more details on invoicing and time tracking, I cover this off in much greater detail in the setup and walk through notes section of this review.

go back to top

payment processing

Payment processing is an area in which FreshBooks really shines. To setup the ability to accept online payments, go to Settings > Online Payment.

online payment

As seen in the screen shot above, FreshBooks can use many different services to accept online payments, with the main method being PayPal. FreshBooks has a FAQ article on the details of a client paying through PayPal http://community.freshbooks.com/support/do-my-clients-need-a-paypal-account-to-pay-through-paypal/.

The nice thing about PayPal if you’re in the United States, is that you can use PayPal Business Payments (providing your clients also have PayPal accounts) to receive money and it will only cost you $.50 to process the transaction. That’s much better than the usual 2% to 3% in fees you pay.

PayPal business

From the online accounting software I’ve reviewed so far, FreshBooks has the most integration options with payment processors.

go back to top

payroll

FreshBooks does not have any payroll.

FreshBooks does have a special connection it can set up with your contractors who are also using FreshBooks. To find out more about this, please visit this FreshBooks FAQ article http://community.freshbooks.com/support/what-is-a-contractor-how-can-i-set-one-up/. If you use the contractor a lot, it could be that it’s worthwhile for that contractor to set up a free account (accounts are free for FreshBooks users who have no more than 3 clients).

go back to top

inventory

In FreshBooks you can track inventory on “items”. You can see your items by going to Invoices > Items. From there you can create a new item. When you create that new item, you’ll see a check box to “Track Inventory” (as seen in the screen shot below).

track inventory checkbox

When you click on the “Track Inventory” check box you get the option to choose how many items you currently have in stock.

inventory stock

Once you create your items and track inventory, you’ll see your latest stock numbers when you go to items (as seen in the screen shot below).

items will now display current inventory

That’s about as complicated as inventory gets in FreshBooks. When you sell items your inventory decreases. When you want to add stock, you edit the item.

FreshBooks doesn’t calculate the value of your inventory, let you receive items into inventory, sell items made up of multiple items (like a bike that’s made up of many parts), or any other type of things you’d want to do with inventory.

go back to top

integration

FreshBooks has a bunch of add-ons, which you can see at http://community.freshbooks.com/addons/.

add-ons

As you can see in the above screen shot, FreshBooks has many add-on categories to choose from.

The add-ons category that I’m assuming would be most useful for people trying to do online accounting software may in fact be the “Accounting” section. This may be a good way to use FreshBooks for invoicing and payments while using other online accounting software for the rest.

accounting add-ons

A peculiar thing is that the reviews for each and every accounting add-on were mixed. A decent portion of reviews also date back 1, 2, and even 3 years, so it’s hard to say how reliable the review data is, since most accounting software is updated a few times a year.

Another interesting thing is that I know that Xero integrates with FreshBooks, yet it’s not listed on the add-ons page. A quick google search showed me that FreshBooks does have an add-on page for Xero http://community.freshbooks.com/addons/view/xero. The reviews are mixed for Xero, as well.

FreshBooks does have a developer API, meaning other software developers can create software that will work and exchange data with FreshBooks. If you’re looking to create an add-on, please visit the FreshBooks developer community page found at http://developers.freshbooks.com/.

go back to top

mobile app

FreshBooks just launched a mobile app for the iPhone on the 28th of August, 2012 http://www.freshbooks.com/blog/2012/08/28/introducing-the-new-freshbooks-app-for-iphone/.

Beyond invoicing and sending estimates, FreshBooks can also take photos of receipts and has a timer for billing purposes.

I haven’t tried the app, so can’t comment on it further than to say that FreshBooks now does have an official mobile app. Previously users who wanted a mobile app had to use an add-on (although, you cans still use an add-on, you don’t have to use the FreshBooks mobile app).

go back to top

other features

My review of FreshBooks has been somewhat different than my other online accounting software reviews, since FreshBooks is more online invoicing than it is online accounting.

I did cover some of the unique features of FreshBooks in other sections, but a few things I didn’t cover are:

1. Sending invoices via Snail Mail for you. FreshBooks has the ability to print and mail invoices on your behalf. Unfortunately not everyone has customers who are comfortable receiving invoices by email or paying invoices online. This traditional invoicing method that FreshBooks can accommodate can be a time saver if printing and mailing invoices is something you do a lot of.
2. Tracking billing hours for an entire team. While I didn’t test out FreshBooks’ time tracking feature for a long period of time, it seems to be more advanced than the time tracking capabilities of other accounting software that I’ve seen. If you are billing based on an hourly basis, especially with a team of people, FreshBooks has this area covered.
3. FreshBooks has the ability to handle support tickets as well as invoice disputes. So, with the combination of the time tracking, being able to assign staff to clients, and support tickets, FreshBooks is a sort of mini-project management system.

go back to top

support / help documentation

The moment I signed up for FreshBooks I received an email.

initial email from personal email address

The one thing I noticed was that the email was from Patrick McNeill’s email address, not a non-descript help@freshbooks.com email. I think having that single person as your contact point is a nice touch.

When you first start to use FreshBooks, help sections appear at the top of your windows.

help sections

FreshBooks provides free phone support, something not offered with all accounting software. They also have coaching staff as well as webinars. It’s interesting that FreshBooks has their phone number as the prominent option for support (as seen in the screen shot above). This tells me that FreshBooks is making an effort to appeal to the non-tech savvy crowd as well. I find that most Internet based companies try to direct customers to an online help guide, then email support, then phone.

For a few on the windows in FreshBooks you may get a pop-up window with help (and even some videos). When QuickBooks Online did this to me I found it a bit annoying. With FreshBooks, it was annoying, but not as much. I think the friendly graphics help, as well as the fact that the videos are both informative and entertaining at the same time.

pop up video help for time tracking

FreshBooks has a support page at http://community.freshbooks.com/support/.

support - faq and contact

I was a little underwhelmed by the documentation provided by FreshBooks. Half the time I searched the FAQ I found answers, half the time I didn’t. When I did find an answer, it was often quite short, a few sentences.

I’ve heard great things about FreshBooks phone and email support, but not having used it, I can’t comment on it. It could be that if I had called the number (which is displayed everywhere) or emailed my “FreshBooks Small Business Consultant” that was assigned to me when I signed up, I would have gotten answers quickly.

In the end, I was able to figure out most of what I wanted to, but I’ve seen better documentation with other software. I thought it funny that even searching something as broad as inventory didn’t pull up any hits.

inventory search results

Considering that FreshBooks does have inventory, you’d figure you’d get at least one hit, right?

go back to top

improvements

I’m going to write these improvements based on what I’d like to see FreshBooks, as online accounting software, have:

1. Chart of Accounts
2. Reconciliation
3. Journal Entries
4. Payroll

go back to top

country it’s made in

FreshBooks was founded in Toronto, Ontario, Canada (my country, yeah!) in 2003.

go back to top

price

FreshBooks goes from free to $39.95+ a month. To see pricing, you have to first go to https://secure.freshbooks.com/external/subscribe/view and then click on the “Paid packages” link (or simply look at the screen shot below).

pricing

Realistically, you’re going to pay at least $29.95 a month, unless you have an very limited amount of customers, or you go through and delete your customers on a regular basis (I don’t know if you can archive customers to get around the 25 limit, but that might be a solution).

If you’re using FreshBooks’ invoicing capabilities to it’s full potential, it’s definitely worth the money.

go back to top

recommendation

As “cloud accounting” or online accounting  software, I wouldn’t recommend FreshBooks. It’s simply lacking some core functionality.

On the flip side, if you’re looking at FreshBooks as an online invoicing system, I think it’s a valuable service.

As mentioned at the start of this article, my review criteria would be based on judging FreshBooks as online accounting software. With Mike McDerment’s (the CEO and Co-Founder of FreshBooks) open letter declaring FreshBooks “cloud accounting software”, I feel it’s fair to review FreshBooks in this way.

To help explain what type of small businesses FreshBooks is designing its services for, both now and in the future, I’m going to pull out some direct quotes from the open letter.

So here’s the news: from this day forward, FreshBooks is Cloud Accounting. We’re not changing our name, we’re just changing the way we describe our services. We’ve taken notice of what you are saying and we’re changing the way we talk about ourselves so it is more consistent with how you talk about FreshBooks. We’ve also taken notice of how your needs have changed. And while we have a culture of “show, not tell” at FreshBooks, I will share that our transition to “cloud” will deliver against some of your emerging needs and reinforce the “accounting” component of our evolution.

I take the above statement as meaning that FreshBooks changed their name in large part because of what users think the service is (and perhaps what FreshBooks ultimately wants their service to be).

Does this mean FreshBooks is going to become complicated and bloated, trying to serve every kind of business and be all things to all businesses? No. We believe that in trying to serve everyone, you serve no one. We also believe that service-based businesses – people who get paid for their time and expertise – are the future of the economy. We know these businesses have unique needs that are hugely underserved, and we believe that the entrepreneurs who work hard every day to secure our economic future – by applying their time and expertise to other people’s problems – deserve cloud accounting purpose built for them.

So FreshBooks is not designed for everyone, nor will it be – we are going to stay focused on service-based businesses. So if you run a restaurant, or have complex inventory needs – you may enjoy using FreshBooks, but it’s not purpose built for you. But if you are a lawyer, a marketing or advertising agency, a plumber, an interior decorator, an IT professional, a therapist, an architect, a web professional – if you create value for your customers by applying your time and expertise to other people’s problems – FreshBooks is designed for you.

FreshBooks is clear about where their focus is and they want to stay specialized in helping a certain segment of the small business market, which is service-based businesses. I can respect that, and honestly, with so many choices out there, having software that is specialized in certain areas is better than every company being a clone of one another. The people who find value in FreshBooks are probably quite happy. The people who don’t are not required to use it, there are other options available.

I think potential users of FreshBooks should understand its roots, read the open letter, and know what their needs are, before they try to use it as accounting software. I hope that I’ve helped potential users understand what FreshBooks is a little bit better.

One issue I will take with FreshBooks’ messaging is that it’s not super clear that FreshBooks isn’t a fully functional online accounting system. Then again, how many companies promote their shortcomings?

What I’m worried about is small business owners thinking they have their accounts in order by using FreshBooks and creating a mess without realizing it. If you know what you’re doing accounting/bookkeeping-wise, you’ll understand FreshBooks limitations, and be able to avoid some rookie mistakes. For beginners who don’t know or want to learn accounting, arguably the target market of FreshBooks, I encourage you to check with an accountant or bookkeeper to make sure you’re tracking everything correctly and that you’re gathering all the data you need to in order to do your bookkeeping properly.

Using FreshBooks in conjunction with other online accounting software is also a very real possibility. Whether this would work for you depends on what online accounting software you want to (or do) use, whether it integrates with FreshBooks, and how well it integrates with FreshBooks. The best thing to do would be to sign up for a free account and see how the software work together.

How about using FreshBooks for online invoicing and some basic project management?

I don’t think you can go wrong using FreshBooks for what it was designed to do. If I had a lot of hourly based projects with multiple clients, I think I would use FreshBooks for the invoicing and online payment side of things. It’s pretty neat how clients can go online to see an up-to-date accounting of their business with you. With FreshBooks, you can suddenly offer the same service as big businesses like cell phone and utility companies. Receiving payments online is also such a great feature. There’s no more depositing checks into banks, and because your clients can go online to see their bills (and you see if they’ve done so), there’s less cat-and-mouse games that can be played when trying to collect money.

Other accounting software

If you’re wondering about alternatives, I’m currently doing an online accounting software review and comparison. Currently I’ve done reviews of the following accounting software:

1. Kashoo review
2. Wave Accounting review
3. LessAccounting review
4. Quickbooks Online review
5. Xero review
6. FreshBooks review
7. FreeAgent Review

go back to top

setup and walk through notes

Signing Up

Signing up for FreshBooks is simple. Go to https://secure.freshbooks.com/external/subscribe/view, enter your Company Name and Email, and you’re on your way.

signing up

Well, actually, not so simple. Freshbooks wants a few more details before letting you in. No big deal.

signing up part 2

After filling out a form for a couple minutes, a pop-up with a video shows. I choose to watch it.

video pop up

The approximately 3 minute video is well produced and covers off the basics of sending an invoice via FreshBooks. You can see this video and other on the FreshBooks tour page at http://www.freshbooks.com/tour.php.  Even though FreshBooks call itself “Cloud Accounting”, you can tell their primary focus really is online invoicing. Watching the video I actually learned about a neat feature I was unaware of, which is the ability to track if a client has opened up a sent invoice.

Once I watch the video, I click on “Take me to my account” and I get another pop-up.

what do you bill your clients for pop up

So far the visual look of the whole process has been simple and slick. I’m now taken to where I can create my first invoice. Yet another pop-up directing me on what to do.

first invoice

Unlike most other online accounting software, Freshbooks wants to get you using the software right away. There’s no setup of accounts or contacts. This is a bit different for me, since I usually want to make sure I have everything setup just right (bookkeeping / accounting rewards accuracy) before diving in. I’ll go where FreshBooks directs me for now.

Invoicing

The one thing that is different about FreshBooks than other accounting software is that they are really online focused, meaning that one of the two requirements for creating a new contact is an email address (the other one being an Organization Name).

no email address? enter your own

I was wondering about what to do if my client didn’t have an email address. After looking through their help file with no quick answers, a quick mouse over the red asterix (as seen in the above screen shot) gave me the answer I was looking for

Enter your email address if your client doesn’t have one.

After creating and saving a new client, the “new client” portion of the screen minimizes and reveals the blank invoice to fill out.

blank invoice to fill out

I’m a bit confused by the difference between a “Task” and “Item” at first. Most of the accounting software I work with doesn’t have more than one option. I quickly guess that “Task” must be for hourly services while “Items” are for physical products or fixed fees.  I’m assuming that I have both “Task” and “Items” because I chose that I bill clients for both time and items in an earlier setup screen (but I can’t find any way to confirm this by going to settings).

In any case, I go on to create a few tasks. You can create new ones straight from the invoice window. You can also select from existing tasks.

choose an existing task or create a new one

There aren’t very many options, simply a name, description, and amount. Since FreshBooks has a tax column (actually two tax columns), it would be nice to be able to choose a default tax.

creating a new tasl from invoice window

Interestingly enough, when I create an item, I am allowed to choose a default Qty and two different taxes to associate with it. I wonder why the difference?

creating a new item

Once you enter your tasks and items (again, as long as you choose to bill both based on hours and items) you have two more options to fill out: 1. Terms and 2. Notes Visible to Client.

terms and notes visible to client

I now realize there’s more details to fill out, as I forgot to fill out the top right portion of the invoice. I blame this on the pop up help not directing me to that area (or maybe it did and I closed it, I can’t remember). Below is the info I neglected to fill out.

invoice details

The “Online Payment” box for PayPal was already checked. During setup I had entered my PayPal address.

The pop up help directed me to do something with my invoice when I had filled out the “Terms” and Notes “Visible to Client”.

pop up help every step of the way

I choose to send by email, it’s my email address afterall!

email

You can change your default message by going to Settings > Email. I’m on the free version of FreshBooks right now, so I guess I have to pay in order to customize my subject line (as seen in the screen shot above).

Once the invoice is sent, you get the option to: preview invoice, download pdf, or create another invoice.

invoice sent

In case you’re wondering, “preview invoice” will take you to what the invoice looks like (although your perspective and your client’s perspective are slightly different, as seen a couple screen shots below).

preview invoice - your perspective

FreshBooks is an online billing system, so your clients by default get an email with a link to the FreshBooks website that will contain the invoice (as seen in the screen shot below). This is what the email your client gets will look like.

email client will get

Clicking on that email, will bring them to an invoice that looks almost like the one you can see from FreshBooks, but you’ll notice the menu and header are different.

invoice from the client's perspective

The menu will be able to show: All Invoices, Unpaid Invoices, Payments, and an Account Statement. So, your client can not only keep track of the history of invoices with you, but also make payments for multiple invoices at once and check their account statement. I can imagine that this system must do wonders for settling any disputes over invoices and payments (provided that your client actually goes to see the bill online – which you can track – and they make their payments online).

On a particular invoice, your client will have the options to get the PDF, Print, Forward, and Dispute. They also can simply pay.

Another nice feature about FreshBooks invoicing system is that it shows an “Invoice Autobiography” (as seen in the screen shot below).

invoice autobiography

This lets you keep track of what’s happened to your invoice, including if it’s been viewed by your client.

Time Tracking

Time Tracking has it’s own tab in the main menu (the blue one). Time Tracking is used to gather all the hours your staff and you have worked on a client’s project, plus the specific tasks and people who were doing those tasks.

From the “Timesheet”, you can enter view the calendar by Month, Week, or Day, log hours, and start/stop the timer.

The start/stop timer is a simple tracker that you can use to log your hours as your work along (as seen in the screen shot below).

For billing purposes, you need to create both a project and tasks. To create a new Project click on Time Tracking > Projects.

For a new project, you’ll need to create a project name, have a client, choose a billing method, create an estimate of the time you’ll spend, add tasks, and assign team members.

As you’re probably understanding, FreshBooks is geared towards small service businesses who work on projects and bill out by the hour. There are numerous ways to choose billing, with different rates, tasks, and members you can assign. The client is able to see the details of exactly how they are billed as well.

Once you log your hours, you can bill your client by clicking on Time Tracking > Generate Invoice.

As with the “Projects” window, “Generate Invoice” gives you many options for billing a client and what detail to show. When you choose all your settings you click on “Create Invoice” and you’ll get a pre-filled out invoice made for you (as seen in the screen shot below).

Another thing you can do with time tracking is track the time spent by multiple team members at once. You can access that by going to Time Tracking > Team Timesheets. It looks almost identical to the “Timesheet” window.

“FreshBooks is Cloud Accounting”

On the 21st of August, 2012, I received an email from Mike McDerment, CEO and Co-Founder of FreshBooks (as did every other FreshBooks customer) announcing that “FreshBooks is Clould Accounting”. Mike made it clear that FreshBooks wouldn’t be for every business.

That being said, I’m going to do my normal list of accounting software review items to see how FreshBooks would handle it.

Setup

The first thing I usually do is go to the setup and configure settings. You can find the settings on the top right hand of your screen.

settings

Like you can see in the screen shot above, the things you can adjust in settings are:

1. Company: ontact information
2. Taxes: taxes
3. Colors & Logos: cosmetic looks
4. Template: how your invoices and such will look to customers
5. Permissions: setting up access rights for administrators, staff, and clients
6. Online Payment: choose which payment service providers customers can use to pay you
7. Emails: configure emails sent to your customers through FreshBooks
8. Misc: fine-tuning default details, like date format or lines per page

Trial Balance

There is no way, as far as I can see, to import a trial balance or chart of accounts. FreshBooks has no official or easily accessible chart of accounts. For expenses, you have a pre-configured list of categories (as seen in the screen shot below).

expense categories

You are able to add sub categories to expense categories, but you can’t delete, edit, or rename any of the exiting categories and sub categories.

add an expense category

To add income categories, you can go to two places. For “Items”, which are services or products with fixed prices (or non-hourly), you go to Invoices > Items. For “Tasks”, which are services that are billed on an hourly basis, you go to Time Tracking > Tasks.

adding a task

Above is a screen shot of adding a task. You only have three options: 1. Task Name, 2. Description, and 3. Bill to Client (with the option to choose the “Rate per hour”).

With task based income, you start off with a few pre-configured categories: General, Meetings, and Research. You can delete or edit these accounts as well as create new ones.

adding an item

Above is a screen shot of adding an item. Items have a few more configurable options than tasks: 1. Item Name, 2. Description, 3. Unit Cost, 4. Quantity, 5. Taxes (up to 2 taxes), 6. Track Inventory.

In FreshBooks there is no option to set up Asset, Liability, or Equity accounts.

Contacts

In FreshBooks, Contacts is called “People”.

people (contacts)

People is used for both clients (customers) as well as staff (employees) and contractors (kind of vendors – I’m saying kind of – because FreshBooks also has a vendor category).

FreshBooks has an import feature so I try it out. This feature can be found by clicking on My Account > Import and Export.

import export

I try to import using a CSV file.

import clients - step 1

Step 1 is uploading a CSV file. I download a sample to see the formatting, reformat my contacts, and upload it to FreshBooks. The file uploaded and I go on to Step 2.

import clients - step 2

As you can see from the screen shot above, I’m only able to import 4 clients since I’m missing emails for many of my clients. I have this issue because in the accounting software from which I’m importing the contacts (QuickBooks Desktop), I don’t have email addresses for many of my contacts. All my contacts are stored in my gmail account (which FreshBooks can import from, but I have more than business contacts in my Gmail, so I don’t want to do that).

Unfortunately for me, an email address is one of the required fields for a client. Even though this part of FreshBooks doesn’t say it, I remember from creating a new contact that if your contact doesn’t have an email address you can always enter your own. I track down the email addresses of my clients and add them to the CSV file.

When I add the email addresses my import is successful!

When I go to the “Staff and Contractors” tab there is no import function. Since you are able to import clients, it’s unfortunate that you can’t import other types of “people” as well.

Dealing with unpaid bills

FreshBooks has an option of creating vendor invoices (in other words, bills that you need to pay). Frustratingly, you can only use this feature if your vendors (people you buy stuff from) are also using FreshBooks to invoice you.

received invoices

Otherwise, there is no good way of dealing with vendor bills in FreshBooks. FreshBooks only has the ability to enter an expense, or in other words, items that you’ve already paid for. If you owe a company (who doesn’t bill you through FreshBooks) some money, you can’t track this.

Dealing with unpaid invoices

In FreshBooks the only way to deal with pre-existing unpaid invoices is to recreate them as new ones in FreshBooks. To ensure that my reporting is accurate, I dated the invoices from before my start date with FreshBooks.

You’ll notice that FreshBooks really tries to be automated. So much so that you can’t simply save an invoice (you can save it as a draft, but I mean you can’t save the invoice without also sending it). As seen in the screen shot below, your options are: 1. Save as Draft, 2. Send by Email, 3. Send by Snail Mail.

saving and sending invoices

I find having only those three options a bit puzzling since the top of my invoice page says that invoices can be “sent by e-mail, ground mail, printed at home, or saved as a PDF”.

different things you can do with an invoice

I usually send my invoices by gmail, so I don’t want any of those options. I want the option to save the invoice as a PDF and send it to my clients myself. FreshBooks is primarily an online invoicing system that lets your clients receive bills by logging in online, so it can be understood that by default this is the course of action FreshBooks gives you.

To get around this set course of action, I use my email address as the client’s email address so that I can at least save the invoice. Once I save the invoice I can then save out a PDF and send it to my client (as seen in the invoicing part of this section). Some of my clients wouldn’t mind paying online but some would rather pay by check still. Being in Canada, where we don’t always have cheap options for accepting online payments, this is an option that I prefer when I’m billing out local clients (I hate losing 3% of my sales to merchant processing fees). I find it interesting that FreshBooks has a “Send by Snail Mail” option, which is another service that FreshBooks provides, yet no easy save-as-PDF-and-send-it-yourself option.

Dealing with uncleared checks

Since I can’t create or have bank accounts in FreshBooks, there’s no way for me to deal with uncleared checks in my bank account.

Reconcile accounts for one month

Again, since FreshBoooks doesn’t have bank accounts, there’s no way for me to reconcile my accounts.