Through all the years we have noticed that most, if not all, SME ( small and medium-sized enterprises ) business owners tend to use excel spreadsheets for maintaining their record keeping process. When asked why they use a spreadsheet to maintain their accounting process, they usually have two answers in common – (i) spreadsheet is free to use (ii) they don’t know what else they could do.
Before we go any further, we would like to make sure that there’s nothing wrong with using Excel. It’s definitely one of the most versatile spreadsheets out there with a whole lot of functionalities. But, imagine you will have to trim the lawn in front of your house. You are given two tools – One is a Scissor and the other is a Lawnmower. Now, which one would you use to trim the grass?
Using the lawnmower would make more sense, right?
The same thing goes for an accounting tool because it is specially designed to manage the bookkeeping process. Hence, with an accounting software, you can manage the accounting process more efficiently than to manage manually like using spreadsheets. Now, let’s dig deeper to find out more.
Why should you stop using spreadsheets for your bookkeeping?
According to the Telegraph,
In 2012, a spreadsheet error in the rail franchise bid process for the West Coast Mainline cost the taxpayer around £60m.
The followings are the reasons you should abandon spreadsheets for book-keeping:
- Ineffective backing up and restoring capabilities:
If you are using a spreadsheet, backing up and restoring data can be a great issue. While typing and processing data in your spreadsheet, a sudden failure of electricity or the crashing of the hard drive may become a nightmare for you.
We know that these things will happen at the most inopportune time i.e. when you are dealing with the most important stuff, Murphy’s law will be at play. Therefore, spreadsheets can be really bad at retrieving your valuable accounting data.
- The paradox of free of cost:
Even if you are using a free online version of spreadsheets, you are still paying a lot for it. How? That free version of spreadsheets may be used for your bookkeeping but the effort to make the charts and the tables for different accounts and statements may require a huge amount of time.
On the contrary, if you are using an automated accounting program or software, it will do all the stuff on its own. Because it does have preloaded chart of accounts, different formats of accounting tables and so much more. There are a lot of free accounting tools already available out there on the market.
- Lack of real-time or historical data:
When you are using a spreadsheet for your business, it becomes extremely difficult to look at the real-time data and statistics. Spreadsheets are not suitable for storing historical data and when a data is not valuable it is often deleted which makes it almost impossible to analyze the trends of your accounting information. Entering data manually into the system, changing and updating data makes this problem more compounded.
- Lack of customizability or scalability feature for your accounting process:
It’s unlikely to get the most out of the spreadsheets for your accounting process provided that you don’t have the skill of using VBA (Visual Basic for Application). For accounting purposes, you may need to customize the spreadsheets or develop to suit your accounting need. Without having the proper coding knowhow it will be like next to impossible to do it for you.
On the other hand, if you choose a well-developed accounting tool you don’t have to think about the customizability and scalability of your chosen software intended to do the bookkeeping activities.
- Will not enable you to automatically prepare financial reports:
After entering all the transaction data in your spreadsheet, processing the calculation and showing up the results in the form of financial reports may seem a bit messy in the spreadsheet layout. Preparing financial reports in a spreadsheet will require your skill in creating Pivot Tables, crafting charts and graphs, performing VLOOKUPS, running Macros and so on.
However, a full-fledged accounting software will provide you with all the financial statements and reports in line with your needs and demands even if you don’t have the aforementioned dexterities.
- Ease of access:
This is a much-needed aspect when you have multiple users of your accounting tool. You may want to give your accountant the opportunity to void a transaction while you don’t want to give this opportunity to the rest of the users.
But, when you are using spreadsheets, you will be struggling to protect your data from all of your users like anyone can delete a transaction, balance sheet or your trial balance.
So, what should you do for your Bookkeeping?
Fortunately, there are hundreds of free accounting tools out there that can boost your bookkeeping activities. If you do have a WordPress website, we recommend you use WP ERP as a free accounting tool since it will allow you to keep your operating activities as low as possible.
If you are in doubt about the usability and efficacy of the accounting tool, you can get a hands-on experience by trying the demo version from below.
