FreshBooks turns up heat in small-business cloud accounting space

Born as an invoicing solution, the cloud service is finding loyal followers with those seeking an accounting application that it doesn't require an accounting degree.

Mike Pic

For years, FreshBooks purposely avoided calling itself an accounting application – because of the software category's bad rap when it comes to user complexity.

It was all about invoicing.

But that stance changed in August, when FreshBooks CEO and co-founder Mike McDerment (pictured) declared the Toronto-based company's intention to make the company's name synonymous with small-business cloud accounting. (The company's official tagline: "1 cloud accounting specialist for small-business owners.)

"While your FreshBooks account won't have all the advanced features that accountants need at their fingertips, and it won't be mired in accounting jargon that's confusing and complicated for you, we're going to build bridges between your FreshBooks account and the complex tools your accountant needs," McDerment wrote in an open letter to customers posted on the company's Web site.

The timing of the FreshBooks messaging shift isn't all that surprising, given Intuit's heightened attention to the online edition of QuickBooks – along with new cloud and mobile applications that build on its accounting legacy, such as Intuit Fasal (used in India by more than 1 million farmers to gather crop prices).

Indeed, if you look at North America only, FreshBooks is No. 2, when it comes to online accounting software second only to Intuit, McDerment said in an interview in late September (and posted in his letter to customers).

Worldwide, FreshBooks counts 5 million users. You can open an account for free; paid plans start at $19.95 per month.

From a small-business standpoint, this heightened competition will be a good thing -- because it means both of these software developers will spend more time trying to add the sorts of features their customers are asking for the most (ie, the ones they NEED the most).

So, I asked McDerment to share some of the things that FreshBooks customers can expect, given this very deliberate shift. Here are some of his priorities:

- Continued focus on services-based businesses, the ones that "create value for your customers by applying your time and expertise to other people's problems." This would include lawyers, marketers, advertising agencies, plumbers, decorators, therapists – anyone who might charge for their time. 

- An emphasis on simplicity, since the most common "competitor" to the Freshbooks approach is pen and paper or someone's accountant.

- New features that address services businesses, such as expense tracking, the ability to produce profit and loss statements.

- More attention to mobility, since small business owners are often on the road or handling "accounting" tasks while doing something else long after work hours "on the edges of their time." The company introduced its Apple iOS app about a month ago, but there are no official Android plans. "A big part of accounting is having all this information available on all your devices," he said.

- An extended ecosystem of add-on tools that extend or integrate with Freshbooks, from CRM applications to payment gateways. There are currently about 70 related Web applications with more to come, McDerment said.