Spreadsheets vs. Accounting Software: Where to Begin

Spreadsheets vs. Accounting Software: Where to Begin – This blog post will give some insight on the question of whether a business should start using a spreadsheet for business information or should they use some sort of an accounting system as they get their business started.

 

This is a question that is always asked as small businesses are about to start, which way is the best way to go?  A big, sometimes costly, accounting system or a small, simple spreadsheet that can keep track of everything that is needed at the end of the year?   From my time spent working with accounting software and knowledge of spreadsheets, there are arguments both ways as to which would be better for your business. But at the end of the day, an accounting system seems to be the best way to go about your bookkeeping needs.

 

Some points against using spreadsheets are as follows:

 

 

•  Excel formulas are complex and prone to error. Accounting software handles all the calculations for you, and does it properly.

 

•  Excel spreadsheets are susceptible to fraud because it’s easy to change information and hard to keep track of who’s making the changes, whereas accounting software maintains an audit trail.

 

•  Spreadsheet errors are easier to make (copy/paste errors, moving content out of cells that other formulas base their calculations on, etc.), and are much harder to track down.

 

•  Each income stream requires a different spreadsheet to track our earnings. This means that as we start offering more services, the number of spreadsheets will increase, and this can become confusing.

 

 

One of my favorite things about an accounting system is the ability to call reports at any given time for a multitude of different reports to see your business from many different angles.  There are built in reports of an Income Statement and Balance Sheet, as well as reports broken out by vendor or sales item, among many others.  Fundamentally, accounting software is built to ensure you record your accounting data effectively with minimal mistakes and good auditing. But you still need to use the tool properly to get the benefit. Another advantage is that many accountants and bookkeepers are more familiar with accounting systems and can help with any discrepancies your accounts might have if you use their preferred tool. 

 

When all said and done, the cost of an accounting system might seem to be costly at first, but if it can save time come tax time, which is money well spent.

 

Is there anything that I missed?  What are some other arguments, for or against, the use of either a spreadsheet or an accounting software for a business that is just getting started?