I love Freshbooks. I use it in my own business. It’s a fantastic billing system. It has been responsible for reducing my accounts overdue by as much as 30%.
But I was a little disturbed when I received an email from the head of Freshbooks announcing that from this day forward Freshbooks would be known as “Cloud Accounting”. What? I kept reading, quite puzzled. Yes I agree that the product has grown in functionality and is not simply a billing system anymore, but seriously an accounting system?
An accounting system compromises core modules such as accounts receivable, accounts payable, payroll (optional), inventory (optional) feeding into a general ledger (the backbone of the accounting system) and other non core modules such as billing, timesheets etc.
Freshbooks has accounts receivable but has cash basis for expenses and does not have that feeding into a complete general ledger.
In my opinion the key to an accounting system is the ability to reconcile. Ie make sure you’ve accounted for all possible transactions. Can you reconcile in Freshbooks? No.
I can imagine clients giving their tax accountant access to their Freshbooks accounts to complete their “books”. Basing on that information solely you cannot guarantee its accuracy. A tax accountant would probably request subsequent information, which may in fact cost more for the client as they “verify” the information.
If you buy assets or have loan repayments or draw funds from your business you cannot “account” for those in Freshbooks. It does not have a complete general ledger system allowing you to print a balance sheet and see the worth of your business.
So, why oh why would Freshbooks now market themselves as an accounting cloud system? Has all their favourable feedback gone to their heads? I think it might have. They have a strong customer base and have now positioned themselves in a market for which they do not belong. I foresee problems ahead. Perhaps I’m wrong perhaps I’m too pendantic about what a true accounting cloud system like Saasu or Xero is. Maybe I am, but I’m sticking to my guns,
Freshbooks is not could accounting.
Freshbooks is however a fantastic billing system.