For decades, companies have relied on Microsoft Excel for bookkeeping, budgeting, and other accounting needs. Especially for small businesses or startups, using excel for their bookkeeping may be a default choice. Why not, right? There are plenty of Excel bookkeeping tutorials, and free templates online; and it’s also easy to search for formulas to use for the spreadsheets.
However, as your business expands, managing your finances will be a bit more complicated. Eventually, you’ll be faced with the question, “Can Excel bookkeeping keep up with my needs?”
As your small business grows you probably won’t have time to take care of the manual tasks that Excel bookkeeping demands. And as you know, being behind your books means bad news for your business.
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In this article, we’ll take a look at the disadvantages of Excel bookkeeping and why you should consider upgrading your methods.
7 Reasons to Upgrade from Excel Bookkeeping
Before we go any further, let us be clear that we don’t deny that there are some pros to using this software (or its close cousin Google Sheets) in bookkeeping. Some advantages of Excel bookkeeping are: 1. easily store data in spreadsheets; 2. perform basic calculations (set macros and formulas); 3. create bookkeeping templates; 4. track invoices; and 5. affordability.
While you can utilize the benefits of using Excel for bookkeeping, there are drawbacks that definitely outweigh these mentioned advantages.
1. It involves a lot of manual entry
Every dollar you can save counts if you’re a budding business. And it’s understandable if you’ll be on the fence about using modern bookkeeping software for your company because of their prices. Although affordability is an edge of Excel bookkeeping, the downside of it is that it requires plenty of working hours. This means manually entering and categorizing each expense in relevant spreadsheets.
As the old saying goes, “time is money”. When you spend a huge chunk of your precious time bookkeeping you’re wasting money and losing opportunities for your business. Even if you have a dedicated part-time employee doing Excel bookkeeping for you, it will still take them long hours doing manual entries, which means you have to pay a steep price for their services.
A huge benefit of using bookkeeping software is its ability to automate a ton of manual, repetitive tasks, which speeds up the process of bookkeeping.
2. It is more prone to human error
With a lot of manual entry involved in Excel bookkeeping, the risk of human error is inevitably high. A broken formula, for example, could totally mess up your financial records, tracking, and reporting. In fact, in May 2012, JP Morgan Chase lost over $2 billion dollars on the capital markets because of an oversight on their Excel spreadsheet that involved manual copying and pasting from one spreadsheet to another – yikes!
Although mistakes are unavoidable, you could effectively minimize them with modern accounting tools. Data entry errors, errors of commission/omission, or errors in applying a wrong accounting treatment to a transaction can be reduced with the features of bookkeeping software.
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3. It doesn’t allow integration
Another reason why Excel bookkeeping demands plenty of manual entry is that it doesn’t allow the integration of other apps. With advanced bookkeeping tools, you can sync and integrate tools, reports and other vital data feeds into the dashboard.
Integrations will save you a lot of time, as you can monitor and reconcile your bank accounts, conveniently update your expense reports, automatically bill clients from your integrated timesheets, track and manage inventory, and a whole lot more.
4. It needs some expertise
Sure you can always download free Excel bookkeeping templates from the internet and get formulas from tutorials. However, without proper training and understanding of what you’re dealing with, you may end up with incorrect calculations.
Although for accuracy and your convenience we recommend that you work with an accountant or a bookkeeper, most modern bookkeeping tools are user-friendly and could be utilized by anyone.
5. It doesn’t show you the big picture
Who has the time to go through spreadsheet after spreadsheet and manually analyze data? We’re sure you don’t. Unfortunately, you need to do this with Excel bookkeeping if you want to see how your business is doing financially.
Bookkeeping software systems enable users to see their cash inflows and outflows in real-time, closely monitor receivables and generate reports that are all important in making vital business decisions.
6. It makes collaboration difficult
In a world where remote working is the new norm, keeping your books in Excel will make it difficult for your accountant, bookkeeper, or other team members to work together. Even if you upload your Excel spreadsheets to the cloud, it will be challenging for your teams to simultaneously plan, forecast, and set budgets for your company.
Bookkeeping software, on the other hand, makes collaboration easy. These tools have built-in features that make it easy for you and your team to seamlessly work with your outsourced bookkeeper no matter where you are located.
7. It won’t upscale with your business
Every startup’s goal is to grow, which means all aspects of the company must be able to scale as the business expands – including your accounting and bookkeeping processes.
Excel bookkeeping lacks functionalities that can meet the demand of a business that is scaling at a fast pace. On the contrary, bookkeeping software has features that allow the automation of time-demanding tasks. This means as a founder of a startup, you’ll have more time to focus on other areas of the business that contributes to its growth.
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Take your bookkeeping to the next level
Don’t wait for your business to suffer a huge loss or have issues with the IRS because of manual entries and human errors that you can avoid – it’s time to upgrade your bookkeeping methods.
At miplly, our online bookkeeping services and monthly bookkeeping services start with helping our clients set up their miplly dashboard. From here, our clients can connect their bank accounts, download transactions, and analyze their expenses while directly working with a designated bookkeeper.
Bookkeeping shouldn’t be complicated, let us help you make things much simpler – start your 7-day free trial today.
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