Accurate financial reports are essential to running your business efficiently. Spreadsheets are prone to errors—just one bad cell can distort the numbers you use to make important decisions!!
Also, as a business grows, using Excel or Google Sheets to handle accounting doesn't look very professional and becomes more and more difficult. You must manually enter more transactions as the company grows, and the problems of using Excel become more apparent over time.
Here’s a look at some of the data that needs to be tracked to create accurate financial reports and where things start to go wrong.
Reason 1. Spreadsheets Are Prone to Human Error
The Bookkeeper must manually input all of the transactions into Excel, which increases the risk of a manual error. Assume, for example, that the accountant is using last week’s invoices to update accounts receivable. The accountant enters a sale amount of “$8,115”, rather than “$1,815”. Accounts receivable and sales are overstated by $6,300!!! So when making a decision of buying that new piece of equipment, your decision is based on higher sales than the reality. If you had had the right sales number, you might have decided to wait before changing the equipment.
Reason 2. Multiple Spreadsheets Don’t Work Well Together
For example, your material purchases spreadsheet has a separate tab for wood, metal, and five tabs representing the component parts. When you enter materials you get a total dollar amounts at the bottom of each spreadsheet tab. The dollar amount for each tab are combined to generate a grand total and are linked to the calculation of the material purchases account in your Profit & Loss report. If one of the seven links is incorrect, the entire account balance is misstate.
Reason 3. Knowledge Isn’t Automatically Shared
As your company grows and the Excel accounting system becomes more complex, it is more difficult to understand how the entire system "speaks" together.
For example, you (or your bookkeeper) must confirm that each spreadsheet has been *fully updated* before the ending balances are transferred to your financial statement Excel document, otherwise your numbers won't be trustworthy and you could buy a piece of equipment thinking you are making enough money while you are not.
Reason 4. It’s not Professional
At one point you’ll be required to supply your financial statements to stakeholders, including lenders, banks or a potential investor. Using spreadsheets will communicate a lack of professionalism, since a growing firm should invest in software tools that help the company operate efficiently.
Given these challenges, every business should consider moving toward an automated accounting system.
The Many Benefits of Accounting Software
Here are just a few of the benefits of using an accounting software to replace Excel or Google Sheets. Keep in mind Excel or Google Sheets don’t include important things like tax preparation, payroll or inventory, all of which can be managed with softwares.
Note that we might receive a referral commission for suggesting softwares, however we truly believe they are the best, hands down. We use them on a daily basis and love them.
More transactions in less time: Automation cuts down on the average time needed to process a single transaction. If your average sale price of a piece of furniture is $400, the firm would process over 7,500 transactions a year to reach $3 million in sales. That would translate into more than 625 sales a month, or more than 144 sales a week. Automation would help your accounting department save time and manage the growth in transactions.
Less risk of manual error: An automated system allows each manual input to post multiple transactions. Think about posting a new invoice, for example. Accounting software can post the invoice information to sales (in the income statement) and to accounts receivable (in the balance sheet) at the same time. The same transaction will lower the inventory balance to reflect the sale. Since far fewer transactions are posted manually, the risk of human error decreases.
Financial statements automated: Accounting software will take all of the transactions and generate the financial statements automatically. You no longer have to rely on input into a set of spreadsheets to produce financial statements. You can also post a budget into the accounting software, and compare the actual accounting results to your budget each month.
Each of these benefits can reduce the time needed to post accounting transactions, and you can spend more time using data to make informed business decisions.
Accounting Software Pays for Itself
Change can be hard. Moving to an automated accounting system requires a financial investment (small or large), time investment, and will require people to learn how to use new software. However, this change is necessary if your business wants to grow and operate productively. One of the small software investment to consider is QuickBooks Online (Click for prices and rebates).
We at Onyxia Bookkeeping love that software, it works so well, we've dropped most of all other accounting softwares. We are Officially Certified by Intuit and can give you a help handling your bookkeeping while you focus on rising your sales ;)
We are suggesting Quickbooks Online because we assess how it is the best! Period.
If you do not have your QuickBooks Online account yet, get one here with rebate.
Do you have questions? Contact us now without engagement, send us a message.
Nadine LeBrun
President & Founder
Comptabilité Onyxia Accounting
We are using referral links in this post.