Simple Web-based invoicing service has limitations handles invoicing, accounts receivable, collections, and basic time tracking

If you run a small service business and want a simple way to bill customers for your work, could be just what you need. This Web-based invoicing service is easy to set up and use, and relatively inexpensive: It's just US$14 per month if you have fewer than 25 clients. (For a higher fee, you can use it to manage as many as 5000 customers.) If you want a complete accounting package, however, you must supplement FreshBooks with third-party software at extra cost.

FreshBooks handles only invoicing, accounts receivable, collections, and basic time tracking. You'll need to use a small-business app such as Intuit's QuickBooks or Sage's Simply Accounting to manage other aspects of your books, including paying your expenses and preparing financial statements, such as profit and loss. You can export and import data to and from recent versions of QuickBooks and Simply Accounting or other accounting programs that can use data in CSV (Comma Separated Values) format.

One alternative to FreshBooks is the Online Edition of Intuit's QuickBooks, which costs US$20 per month (and up) and performs a generally broader range of accounting functions than FreshBooks does. However, the online QuickBooks doesn't support online invoice payment (the packaged app will support it, but only with an add-on); and, if you require time tracking, you need the US$10-per-month Sales Package add-on.

Since FreshBooks is designed for service businesses such as consultants, it does not track inventory. That makes it unsuitable for a company that sells products, unless you have no need to track quantities of stock on hand. Though FreshBooks' parent company, 2ndSite, says the service has more than 130,000 users based in more than 100 countries, it doesn't support multiple currencies in the same account; you'll need to set up a separate account for each currency to work around this limitation. And while FreshBooks allows your employees to keep track of time spent on client projects, they must log in to the site to enter their time.

You can import a customer list from an accounting application, or enter customer information directly in FreshBooks. Creating an invoice in FreshBooks using an online form is simple. You can customize the look of the invoice by changing the colors and adding your company logo. You can notify your client of the invoice by e-mail (they receive a link to view the invoice online; you don't send the invoice itself) or have it printed remotely and sent via U.S. Mail, an extra-cost service (US$1.39 each, though you can get quantity discounts; invoices sent outside the U.S. and Canada cost double).

Customers can visit the FreshBooks site to view their invoices and account-history details. You can allow them to dispute invoices or to pay them electronically via debit or credit card using one of ten supported payment gateways, such as PayPal (normal gateway user charges apply). This handy electronic-payment capability is one of FreshBooks' highlights and can effectively speed up account collections and boost your cash flow.

FreshBooks has its limitations, but if you don't need all the capabilities of QuickBooks or the like, this simple online service will handle your billings and collections with aplomb.