Why you don’t want to use a spreadsheet for your accounting software

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About this time of year we start to talk to a lot of small businesses who are using a spreadsheet to track their income and expense for tax purposes.  I know that to some small businesses, this seems like the perfect solution.  For me, I am not a fan.  There are some short comings to using a spreadsheet and I’d like to point some of them out.

  • It takes about as much time, if not more, to enter transactions on a spreadsheet as it does to use accounting software AND, you do not get the forced double entry method with a spreadsheet as you automatically get when you use accounting software.
  • For me, I cannot get the information in a format that is customary for financial statements so they do not “speak” to me the way a traditional balance sheet and profit and loss statement do. I always feel like I am likely missing something because the account balances, especially for a balance sheet are not in a traditional format.  I might be old and crotchety, but there it is.
  • Most people want to track income and expense, but they do not provide a balance sheet at all, so the financial picture from the spreadsheet does not provide for the VERY IMPORTANT balance sheet. The balance sheet is really critical.  We use it to make sure the entire financial statement picture balances.  We need to know cash balances, credit card balances, other debt, fixed assets, payroll liabilities, etc that were outstanding at the end of the year.  Believe me, we just need it.
  • Review transactions from a spreadsheet is not as easy as with accounting software where you can just see an account, decide to look at the details of it and drill down to them. See a single transaction you want to look at?  Drill down right to that transaction.  All of that is lost with a spreadsheet.
  • I spend more time working with a spreadsheet than I do accounting software or at least, financial statements that came from accounting software thus your return takes more time for me to prepare. So, saving money on the spreadsheet caused you more billable time on my end.
  • Once you start using accounting software, you will be amazed you ever did without it. You can easily reconcile your bank and credit card accounts, you can track who owes you money and who you owe money to.  You can see how you are doing, if you are making the income you think you are.  It should not take too much explanation as to why keeping good, current, accurate financials statements will make it easier for your tax return preparation, but what is really important it will make it easier for you to be a more successful business!!

Accounting software is cheap!  It is well worth the cost in the amount of time it will save you, the by far better quality product you will get and accounting software has a ton of other benefits that a spreadsheet completed once a year will never offer.

If you want to save time and frustration on your end, invest in some accounting software.  Xero and QuickBooks both offer very basic cloud based software that is just not that expensive.  If you are serious about being successful, want to grow and expand your business, want to know why you are or are not as profitable as you can be, then get serious!  You need accounting software if you want to act like a business that is in it to be successful.  Find a good CPA and invest in some time with them and you will see that we can seriously impart your path to success with a business.  We are worth it, I swear.  Where we save you time and frustration, you can use that time and your creativity to grow the business.  Come on, let’s do this together!

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