Do a GOOGLE search for “Online Invoicing Systems” and you’ll come up with an enormous list:
About 1,810,000 results (0.33 seconds)
2 Types of Online Invoicing Packages
The truth is there are a large number of alternatives to choose from. So many in fact, that you’d be hard-pressed to evaluate very many of them. However there are really only 2 types of online invoicing packages that a start up should be looking at:
Standalone Invoicing Systems
Online Accounting Systems
I’ll look at 2 popular standalone systems and 4 different online accounting systems. They were chosen based on their relative importance in the marketplace and my estimate of their “staying power”. In other words I don’t think it makes sense to evaluate an alternative that is reasonably likely to disappear. I did this in part by researching the companies on CRUNCHBASE. Of course most of these companies do a pretty good job of letting members of the accounting profession know about them and, as a result I am quite familiar with a variety of offerings from each of these publishers…
Traditional Paper-based Invoicing System…
Using An Online Invoicing System…
Accounting vs Invoicing
The billing and collections processes are an essential part of any accounting system. Arguably they are the most important parts. The decision to implement some sort of invoicing system, must happen very early on – when you send out your first invoice.
For most startups the bookkeeping can be done after the fact, however if your business is going to survive you’ll have to bill early and often – assuming you have customers. That means building an invoicing system right out of the gate. The good news is that it is much easier to evaluate an invoicing system than it is to evaluate an accounting system. Comparatively, an invoicing system can be quite simple. If you’re evaluating a standalone system, you don’t really need to know anything much about accounting.
Remember that as a small business owner, you’re likely to be one of the primary users of the invoicing software. When it comes to using accounting systems, you’re much more likely to get someone else to do the bookkeeping for you.
If you haven’t yet made a decision regarding your accounting system, it isn’t really very risky to select a standalone invoicing system. Ultimately you can continue to use the invoicing system alongside your accounting system indefinitely, or simply transition later to using the invoicing features of whichever online accounting system you decide on. In fact you could even elect to try out Wave Accounting (see below) for its invoicing functions alone, since there is no cost for using the system.
Standalone Invoicing Systems
Freshbooks (Toronto , ON)
According to Crunchbase, Freshbooks received $30 Million Series A on July 23, 2014.
I have used their application for my own accounting practice since 2012. It is very easy to use and I highly recommend it – particularly for small, service-based businesses. Of course as an accountant, I don’t have to pay to use their system. If I did I might be tempted to test PayPal.
PayPal (San Jose, CA)
California-based PayPal was acquired by EBay in 2002 and is a market leader in the online payments space.
Until recently I wasn’t aware that they offered an online invoicing solution for small business. If I had, I might have evaluated it for my own practice. Given that they don’t currently appear to charge a fee (other than transaction-based fees), they would probably be worth your while to take for a test drive. Note that PayPal offers a solution for web-based businesses that sell products online.
Online Accounting Systems
Generally I would recommend that you select a bookkeeper or an accountant first, rather than an accounting package. Any of the packages discussed below will fill the accounting needs of a small start up. However in the wrong hands, any accounting system can be messed up. While many of my colleagues will disparage one or another system, from my perspective this is generally related to their own familiarity with a particular package instead of the particular flaws in the system itself.
On the other hand if you were to evaluate a free system – eg. Wave Accounting – primarily for its invoicing functions, you could easily either start using it later on for all of your accounting needs or transition to another system.
Wave Accounting (Toronto, ON)
According to Crunchbase, Toronto-based Wave accounting has raised $24.6 Million in 4 Rounds from 6 Investors, and has 2 million users worldwide. While the number of users is impressive, it is the only online accounting package that is completely free to use.
For my part I use it both for accounting and invoicing in Sutton Innovation Inc (a tax comsultancy practice). My partners in the practice have remote access to the data and I outsource the bookkeeping to a colleague in the Philippines.
So while I personally use it most often for invoicing and tracking receivables, it is a full-featured accounting package and I can easily supervise the bookkeeping and perform year-end accounting adjustments.
Xero (Wellington, NZ)
Founded in 2006, Xero went public in 2012. According to Crunchbase it has some 370,000 users worldwide – including one of my larger clients. Unlike Wave, Xero actually charges a fee to users – hence the lower number of users.
Quickbooks Online (Mountain View, CA)
Published by Intuit, QuickBooks Online (along with Sage One below) is one of the oldest and most established brands for financial and accounting software. Personally I use it – in conjunction with Freshbooks – for my accounting practice. In addition I use their Profile tax preparation software and can certainly recommend the company and its products.
Sage Online (Newcastle Upon Tyne, UK)
While Quickbooks is strongest in the US, Sage is stronger in British Commonwealth countries and in Africa. Over the years Sage has acquired Simply Accounting and MYOB – both of which I have used in the past. I have not tested their online software – it was just recently launched.
However, given the reputation of the firm, it clearly warrants a look if you are evaluating online accounting software.
While I believe that these probably represent the best options for start ups looking for online invoicing solutions, if you don’t think these 6 options give you enough choice feel free to check out the 27 Free Alternatives listed by Mashable (self-described as “a leading source for news, information & resources for the Connected Generation”).