Move from Excel to accounting software
This post was originally published in the Xero Small Business Guides
Small businesses often start out using Excel — but that’s only doable up until a point. Like every teenager eventually becomes an adult, your business needs to evolve and grow. Find out why the smartest organisations are using online accounting software instead.
Why Excel isn’t a long-term solution
Excel can do a large number of tasks, is easily available and is very widely used in the world of business. And it would be wrong not to not acknowledge this up front. However, while the application is sturdy, it’s the spreadsheets created while using it that aren’t — and this often causes issues down the track.
Spreadsheets are often riddled with mistakes
A spreadsheet done badly has a flow-on effect for any small business. One well-known example of this happened in the UK in 2012. Using an Excel spreadsheet, an error was made that cost the bank JPMorgan $9 billion in revenue.
Unfortunately, this type of error is not an exception to the rule, but a common mistake. As long as manual data entry, copy paste techniques, and formula errors are a reality, the internet is always going to have spreadsheet horror stories.
Six problems with Excel as an accounting software substitute
- Using Excel can be like having to know a programing language. Many small businesses forget this. Excel is so widely used, that it’s never been restricted to those with an expertise in it. In addition to this, lots of Excel users often misjudge their level of expertise.
- Setting up an Excel spreadsheet that meets all of your financial needs requires a lot of thought and planning. It takes time to set up things like expense reports and invoice tracking. You may find yourself in a situation where you constantly need to add or change information on your spreadsheet.
- In Excel, you need to know exactly how you are going to use the data before you start, as there’s no flexibility to configure it later. You need to know what you want to name the reports and the cells you want to print, and ensure each report is properly time stamped.
- Excel spreadsheets are susceptible to fraud because it’s easy to change information and hard to keep track of who’s making the changes. Imagine if your co-worker enters $1,000 instead of $100,000.
- Many users run into performance issues when they work with large amounts of data, combine lots of worksheets or include scripts. It’s system overload. It doesn’t integrate with other small business applications that can help you run your business. For example, accounting software will integrate with apps that do inventory management and time sheeting.
- Transactions kept in Excel are difficult to track. For instance, Excel does not automatically recognize double entries. Instead of Excel providing a better way to run your business, it often acts as a road-block to seeing the real picture.
A spreadsheet done badly has a flow-on effect for any small business.
Why accounting software is better for business
It’s not only easy to use, but it’s also accurate. Cloud-based software is designed to be scalable, cost-effective and tailored to your small business needs.
You can have unlimited users, but can access certain information, giving you reassurance that sensitive data isn’t out in the wild. You’re guaranteed maximum uptime of the software, and backups are done nightly in highly secure, offsite servers, giving you peace of mind. It also takes the pressure off your business to provide adequate storage, which can be costly.
There’s little chance of fraud using accounting software, as there’s an audit trail in the system. It leaves no room for doubt about who has done what, and when.
Reporting becomes easy, and takes far less time. Profit and loss, balance sheets, management reports, sales tax returns, depreciation schedules and foreign currency gains and losses are all prepared with a single click.
Seven reasons why accounting software is better than Excel
- Hit the ground running with confidence An easy-to-use dashboard is one that you don’t have to set up yourself and will give you confidence from the get-go. When you have a clear financial view from the start, you don’t need to worry about making uninformed business decisions.