I really love Freshbooks for timekeeping and billing. There is no better option for solos and very small firms. But in 2012, Freshbooks changed its tagline to “cloud accounting.” Here’s the announcement, from Freshbooks founder, Mike McDerment:
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.
In fact, Freshbooks hadn’t changed anything about the software when McDerment made that announcement. Changes have come trickling out, though. One of the first “accounting features” introduced after the name change was the ability to create a balance sheet — by entering the numbers yourself. At first, I thought it was a joke. It wasn’t. The feature is still present in Freshbooks, and it has not changed.
A balance sheet is not something you can sketch on a cocktail napkin. Real accounting software generates a balance sheet using real numbers generated from your accounts. It’s not something you just make up yourself and then hand over to your accountant for tax preparation.
Then, Freshbooks announced the ability to import expenses from your bank accounts. That’s right, just expenses. And the data you get for your checks, for example, is not particularly useful. You don’t even get a check number to help you identify the check in question.
Further, Freshbooks ignores your deposits. I guess it assumes that the only deposits will be payments on the invoices you send through Freshbooks. If you do happen to have deposits that are not tied to an invoice, you have to enter them manually.
Speaking of payments, because Freshbooks does not match them up with your bank accounts, you do not get all the information you need. If you accept credit cards or use PayPal for processing payments, for example, you will pay a fee on every transaction. But Freshbooks does not account for those fees, so your profit and loss report will overstate your income by the amount of those fees. In other words, if the invoice is for $100, and someone pays with a credit card, there will be a fee of, say, $3. Freshbooks will show a deposit of $97, which leaves a $3 expense unaccounted-for.
But perhaps the most glaring omission is any sort of bank account register, which means there is no way to reconcile your accounts. This is a pretty fundamental omission. If you cannot even reconcile your accounts, you are not doing accounting.
Look, Freshbooks is fantastic timekeeping and billing software. If you are a solo or a very-small firm, there is nothing better. (Although if you want good timekeeping and billing bundled with practice management software, use one of our recommendations.)
But in advertising itself as “cloud accounting,” Freshbooks is misleading, at best. Freshbooks is excellent billing software with a few inadequate accounting features grafted on. It is not accounting software. It is woefully unsuitable for accounting.
(I did reach out to Freshbooks with my concerns, but I never received the promised response.)