Many small businesses use Excel to manage their small business accounting, and it does many things very well, particularly if you’re a one man band.
But as your business and customer base grows, Excel’s limitations start to emerge.
Tracking unpaid invoices in a spreadsheet, for example, can be a manual and error-prone process. How many times have you chased a client on a past due invoice only to find out they already paid, only you forgot to log the payment?
Making the move to “proper” online accounting software might also seem like a daunting task – why change the ways of a lifetime if it involves cost, migrating data, and a learning curve?
Here’s why I’m arguing in favor of making the switch (and it’s simpler and cheaper than you think):
Spreadsheets are prone to human error
Manual data entry, human-error and formula mistakes can seriously mess with your financial tracking and planning. Cloud-based accounting software tools such as FreshBooks, Xero, or Intuit QuickBooks limit data entry and record-keeping mistakes because they do most of the hard stuff for you – automatically. You’ll also get a dashboard view of all your financial data, from expense reports to timesheets, budgets to cash flow statements – so much easier than managing a folder full of Excel spreadsheets.
Excel isn’t actually that easy (or intuitive)
It doesn’t matter whether you’re numerically illiterate or not, Excel requires programming expertise especially if you need it for financial reporting. Formulas, filters, data connections, etc. make setting up a spreadsheet to cover your basic accounting needs a nightmare! You may also find that you’re constantly tweaking your template to get the outcome you need – getting it right is downright time-consuming and frustrating.
Or you could use accounting software that has all the reports and financial organization tools you need built-in.
Excel spreadsheets exist in siloes
Do you track time in one spreadsheet, create expenses in another, and log and monitor collections in a third? That’s just basic accounting and already it’s complex. One spreadsheet doesn’t talk to another or with any of your other accounting functions.
With accounting software, you can sync and integrate data feeds and reports. For example, you can feed your bank statement data directly into your software and update your expense reports with your latest outgoings automatically. You can also invoice clients directly from your timesheet without the need to manually cross-check a bunch of spreadsheet data.
The integration doesn’t stop there. More and more providers are offering customers a catalog of add-ons and business apps that add extra functionality to your software and incorporate data from other software such as inventory management, time tracking, etc. Take a look at FreshBooks Add-Ons, Xero Add-On Marketplace, or the Intuit Quickbooks Apps by way of example.
Excel doesn’t provide a big picture view
Sure you can create pie charts from your Excel data, but who has time for that? If you want to see the big picture, you end up spending hours sifting through and analyzing data manually, hoping to pinpoint red flags. Using accounting software, it’s all done for you:
See your cashflow in real-time with dashboard charts
See who owes you on overdue invoices instantly
Monitor the reports that matter to you most. For example, if you’re in the start-up phase you can quickly assess your progress towards breakeven point using profit and loss reports.
All these reports can be pulled in an instant, something we could all do with at tax time or when your accountant calls.
Spreadsheets are static
When I say static, I mean it’s the opposite of the dynamic functionality, you get with online software.
With online software, everything is automatic – data feeds, back-ups to the cloud, syncs with other business apps. Excel doesn’t even come close.
You also benefit from new features and updates from the software provider (for free) and without interruption to business processes. It all happens in the cloud, no new licenses or upgrade fees required.
Need to access your accounting data on the go? Put away your laptop, cloud-based accounting software services are also accessible from your phone or tablet. You can also give your accountant or bookkeeper access privileges – an excellent way to ensure that everyone is using the same data whereas sharing an Excel spreadsheet quickly opens the doors to version control hell.
Worried about price?
Don’t be. Starter packages begin at less than $15 per month while more robust agreements are priced at around $30 per month and most providers offer a free 30-day trial.
Are you ready to make the move from Excel? Check out this article: Switching to Online Accounting Software – How and Why? for tips on evaluating your options and planning your switch.