Small businesses that do their own accounting usually start out using Microsoft Excel or paper forms, but they quickly find out that neither does an adequate job. There can be no denying that Excel is widely used and performs a number of tasks admirably, but a poorly executed spreadsheet can have a ripple effect that hurts the business year over year. One prime example of this came in 2012, when JP Morgan had an Excel spreadsheet error that ended up costing them billions. While that is an extreme case, it’s not an isolated incident.
Accounting in Excel is Hard
There are a number of potential problems that can arise when you substitute professional accounting software with Excel. The most common mistake is underestimating how difficult it is to actually use. You’ll need to have at least one person who is proficient in Excel and able to create macros and pivot tables in addition to report configuration and data entry. Re-configuring reports after you start data entry can be a nightmare, so be sure to have a plan before you get started.
Keeping track of all your transactions in Excel can be a nightmare, as it simply doesn’t have the power to spot mistakes such as duplicate or missed entries. Spreadsheets can also be easily altered, which in turn can lead to fraud and trouble with the IRS.
Automation is Key
Accounting software that automates many manual entries is a better option for your small business. It removes data entry errors, reduces the opportunity for a disgruntled employee to commit fraud and generally has an easy to follow interface. Use it virtually by finding a cloud-based solution and you’ll have 24/7 access to your financial data without needing to worry about backing it up every 5 minutes.
With accounting software you can be sure that the data you are looking at is accurate, especially since it can be integrated with other small business software and linked directly to your bank accounts. The reports that you need can be accessed with the click of a mouse, while all the information included in the software is automatically kept up to date. This can be especially useful when it’s time to prepare your taxes.
Excel is what small businesses have been relying on for years and change doesn’t come that easy. What you have to ask yourself is whether you’re willing to accept the financial risks that come with using it. Be proactive and bring your business into the present by using cloud-based accounting software. Call me today so I can help you find the best solution.