Small Biz Test Lab: Freshbooks

FreshBooks sends professional-looking invoices quickly, but you will eventually outgrow the Web-based service.

Author:: Jonathan Blum
Publish date:: Sep 28, 2009 12:09 PM EDT

TORONTO (TheStreet) -- Billing customers and collecting payments are some of the biggest chores for small-business owners.

Gone are the days when invoices were created and sent by snail mail. Now, it seems like everyone has jumped into the accounts-receivable game, from client management specialist NetSuite (N) (Stock Quote: N) to payroll services provider Paychex (PAYX) - Get Report (Stock Quote: PAYX). Even giants like American Express (AXP) - Get Report and Bank of America (BAC) - Get Report offer billing tools.

(N) (PAYX) - Get Report (AXP) - Get Report (BAC) - Get Report With all these sharks swimming around, there's plenty of blood in the water. Tax software maker Intuit (INTU) - Get Report (Stock Quote: INTU) just paid $170 million to gobble up the Web 2.0 personal finance site Mint.com.

To find out what the remaining field looks like for small businesses trying to bill smarter, I tested FreshBooks, a Toronto-based invoicing service. It's free to start, but full-service packages run $150 a month. Most small businesses should expect to pay $29 a month.

(N) (PAYX) - Get Report (AXP) - Get Report (BAC) - Get Report (INTU) - Get ReportWhat you get: FreshBooks is probably the simplest way to bill customers and do basic accounting.

(N) (PAYX) - Get Report (AXP) - Get Report (BAC) - Get Report (INTU) - Get Report FreshBooks aims to make billing digitally and tracking expenses easy. And from that perspective, the product succeeds. Tired of sending invoices using Microsoft (MSFT) - Get Report (Stock Quote: MSFT) Word? Simply head to FreshBooks' Web site, enter some basic company information -- no complex tax data or sensitive details are required -- and in three minutes you will have a page with tabbed categories, such as clients, team, estimates and expenses.

(N) (PAYX) - Get Report (AXP) - Get Report (BAC) - Get Report (INTU) - Get Report (MSFT) - Get Report It's easy to get started. Just enter your clients' information (the free edition only allows three). FreshBooks will prompt you to create an invoice. After you fill out the particulars, the service crafts a bill you can send by e-mail for free or by snail mail for $1.79, which includes postage and paper costs.

(N) (PAYX) - Get Report (AXP) - Get Report (BAC) - Get Report (INTU) - Get Report (MSFT) - Get Report These basic billing features are nested inside a larger suite of online business tools. Your contractors or employees can bill based on time. You can create estimates and monitor expenses. You can compile reports and opt for online payment. It takes five minutes to bill a client.

(N) (PAYX) - Get Report (AXP) - Get Report (BAC) - Get Report (INTU) - Get Report (MSFT) - Get ReportWhat you don't get: FreshBooks isn't a comprehensive accounting program, not does it integrate easily with your existing IT architecture.

All the the data-entry screens are simple, but they still require you to enter information manually. It's possible to import and export data, but task lists aren't easy to transmit.

(N) (PAYX) - Get Report (AXP) - Get Report (BAC) - Get Report (INTU) - Get Report (MSFT) - Get Report While FreshBooks offers an open API that allows developers to adapt the program to their systems, software support is limited. For example, the only project management tool that worked with my test program was Basecamp, from Chicago-based 37signals.

And then there's the 800-pound gorilla in the room: your accountant. Your bean counter is probably accustomed to Intuit's QuickBooks. That means your accountant might need to redo your ledgers manually in QuickBooks if you rely on FreshBooks. That's likely to make him or her cranky at tax time.

(N) (PAYX) - Get Report (AXP) - Get Report (BAC) - Get Report (INTU) - Get Report (MSFT) - Get ReportBottom line: If you're stressed about being 15 days behind in billing clients, get FreshBooks. It's fast. It's easy. It sends professional-looking invoices. But you will eventually outgrow it, and move on to QuickBooks.

(N) (PAYX) - Get Report (AXP) - Get Report (BAC) - Get Report (INTU) - Get Report (MSFT) - Get Report FreshBooks will help you start tracking your earnings. Just keep in mind that it's only a start.