5 Reasons Not to Use Excel for Bookkeeping

5 REASONS EXCEL IS SLOWING YOUR BUSINESS GROWTH

Have you ever tried using pliers to pull a nail out of the wall? It is possible, but it takes more effort, and sometimes you are left with a big hole. All because you weren’t using the right tool.

 Though grabbing a pair of pliers may be more convenient at times, using a hammer will always be the better choice.

 The same is true with bookkeeping. Microsoft Excel can often be the go-to choice for startups and young companies when creating a bookkeeping system. It is familiar and typically free. You can even find free bookkeeping templates online.

 However, though Excel may be the easiest choice, it is not the best choice long term as your business grows. Here are five reasons why.

 Excel requires manual entry that takes a significant amount of time.

Can you imagine how much time it would take to manually enter and categorize all of your personal expenses into a spreadsheet? Who would want to do that?

 Businesses typically have exponentially more transactions, so a business using Excel spends a significant amount of time on data entry alone. Plus, most businesses practice double-entry bookkeeping, which means every transaction must be entered twice. Though Excel itself is free, there is a high cost of employee hours required to keep the data up-to-date.

 Using Excel increases the likelihood of data errors that are hard to detect.

Almost all accounting software programs interface with banking institutions, allowing you to import transaction data from your accounts directly into the software. This dramatically reduces the possibility that a transaction will be missed or its details entered incorrectly. Because Excel requires that all data be entered manually, the risk is high that errors will be made. These errors may take days or weeks to come to light and be fixed.

 Excel does not make it easy to spot trends.

It is critical for a company’s growth to be able to analyze past performance so it can more accurately forecast and budget for the future. Unfortunately, Excel was not created to store historical data well. It is cumbersome to pull years’ worth of data in order to create the expense detail reports needed to spot historical trends.

 Excel is not easily scalable as your business grows.

Excel might be a good solution when you first start your business. But, as your company grows and your accounting system needs to be more sophisticated, Excel often becomes more of a hindrance than a helpful tool. As your pricing changes, your staff expands, you offer new payment options, or you roll out new product lines, you need a tool that matches the complexity of your growing company.

 Excel does not offer robust financial reporting.

The financial reports that a company relies on to make informed business decisions require a significant amount of time and wizardry to create in Microsoft Excel. Creating even the most common reports like balance sheets, income statements, and cash flow statements requires jumping through many Excel hoops if you want to see anything more than rows and columns of data. Accounting software programs provide actionable, easy-to-digest reports with the click of a button.

 It is clear that Microsoft Excel is not the best accounting tool for any growing business, but what is the best tool?

 There is no one-size-fits-all tool that works perfectly for every business. The combination of your products and services, your customers or clients, and your processes make your business unique. That’s why your accounting system should be tailored to your needs.

 One of the things I do best is help companies create a customized accounting system, including choosing the best software program. Contact me to schedule a time to talk about your business.