Small businesses often start out using Excel – but soon realise that’s only feasible up until a point. Your business needs to evolve and grow. Leading accounting software company Xero explain why and how the smartest organisations are using online software to streamline accounting.
It isn’t a long-term solution
Excel can do a large number of tasks, is easily available and is very widely used by businesses, and it’d be wrong not to acknowledge this upfront. But, while the application is sturdy, the spreadsheets created using it aren’t – and this often causes issues farther down the line.
Spreadsheets can be riddled with mistakes
A spreadsheet done badly has a flow-on effect for any business. One well-known example of this happened in Britain in 2012. Using an Excel spreadsheet, an error was made that cost JPMorgan £5 billion in revenue – ouch.
Unfortunately, this type of error isn’t an unusual occurrence but a common mistake. As long as manual data entry, copy and paste techniques, and formula errors are a reality (and they always will be), the internet is always going to be full of spreadsheet horror stories.
Six problems with Excel as an accounting software substitute
1. Excel can be like having to know a programming language
Many small businesses forget this. Excel is so widely used that it’s never been restricted to those with an expertise in it. Plus lots of Excel users often misjudge their level of expertise.
2. Setting up a good Excel spreadsheet takes time
An Excel spreadsheet that meets all of your financial needs needs a lot of thought and planning. It takes time to set up things like expense reports and invoice tracking. And you may find yourself in a situation where you constantly need to add or change information on your spreadsheet.
3. You need a strategy before you start
In Excel, you need to know exactly how you’re going to use data before you start. 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 you also need to make sure each report is properly time stamped.
4. There's no audit trail
Excel spreadsheets are susceptible to fraud because it’s easy to change information and hard to keep track of who’s making changes. Imagine the impact if a colleague enters £1,000 instead of £100,000.
5. It doesn't integrate with other business applications
Users run into performance issues when they work with large amounts of data, combine lots of worksheets or include scripts. It’s system overload. And it doesn’t integrate with other small business applications to help you run your business. For example, quality accounting software will integrate with apps that do inventory management and time sheeting.
6. Transactions recorded in Excel are hard to monitor
Excel doesn’t automatically recognise double entries. Instead of providing a better way to run your business, Excel often acts as a road-block to seeing the real picture.
Why accounting software is better for business
It’s easy to use, and it’s 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 also choose the level of access, giving you reassurance that sensitive data isn’t out in the wild. You’re guaranteed great uptime with good software, and backups are done nightly in highly secure, offsite servers, for added peace of mind. Cloud accounting software also takes the pressure off your business to provide adequate storage, which can be costly.
There’s little chance of fraud when using accounting software, as there’s an audit trail in the system. It leaves no room for doubt about who’s done what, and when.
Reporting becomes easy, and takes much 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
1. Hit the ground running with confidence
An easy-to-use dashboard is one that you don’t have to set up yourself and that gives 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 financial decisions.
2. Your data is accurate
Your company’s real-time financial data is kept in one place – online, secure in the cloud. Bank statement lines are fed into your software – it’s automatic, and reduces the data entry and potential mistakes.
3. Out-of-the-box reports
Access most of the reports you’ll ever need in a few clicks – no need to wait for month-end. Real-time reports and budgets are easy to view and share. Tasks such as sales tax returns can be finished in minutes instead of hours.
4. Up-to-date information
Create the information your investors might need at a moment’s notice. Your small business will be equipped to manage finances better and more accurately. This is especially important at tax time, when data will be shared with an accountant or financial advisor. Financial tax information is always up-to-date and ready to share.
5. You’ll have a clean audit trail
All of the historical information your investors might need is at their fingertips. A proper audit trail means your data can’t be compromised, and it also records every business transaction. This includes sales contracts, payments to employees, and more. Having a complete audit trail reassures investors about the validity of the company, and meets HMRC’s needs.
6. It syncs with other business applications
When you use cloud software, you’ll be able to take advantage of apps that sync with your financial data. Inventory management, invoicing and more can take the time and hassle out of running your small business.
7. Access to data – anywhere, anytime
Give any member of your team access your data online anytime, anywhere – as long as you grant them permission. Cloud software enables you to share your financial information with your employees, accountant, bookkeeper or financial advisor.
It’s about letting your business grow
While it can be hard to alter the way you do business and embrace change, the potential rewards are huge. The truth is, the writing’s on the wall if you don’t find it easy to quickly manage your day-to-day business using Excel.
Excel was simply not built to replace accounting software – so it’s time to give your business the room to grow and succeed, without restrictions.
Xero is beautiful accounting software that reduces the pain and potential for mistakes compared with Excel. And you can try it free for 30 days here. Want to explore more Small Business Guides? Head here.