9 Reasons Small Business Owners Should Stop Using Microsoft Excel for Bookkeeping

Woman in red shirt leans over computer in frustration

Starting a small business can be a thrilling adventure. New business owners are often excited about the changes they’re going to make in the world, in their communities, or even in their own pocketbooks. That excitement can start to fade the reality of all the little things they didn’t realize they’d need to handle sets in. We often hear from business owners that they didn’t set out to become their own bookkeepers, but this role is a common struggle for them all. 

The most common mistake business owners in this position make is holding on to their Excel bookkeeping for too long. You needed a cheap solution and nothing could beat using the software you already had on your computer and knew your way around—we get it. Now that you’re growing, here’s why you need to leave all the accounting template spreadsheets behind you and switch to a daily bookkeeping software that won’t let you down. 

1. Excel Isn’t Secure for Small Business Accounting

If you’re using Microsoft Excel and storing your data locally, anyone could gain access to it. Keep your bookkeeping information secure by not storing it on your own computers. 

You wouldn’t leave your checkbook open on a table in a Starbucks, but that is the kind of threat you’re leaving yourself open to by storing your accounting information in Excel. We know, we know “nobody uses a checkbook anymore.” But you get the picture, right? 

Your financial information is safer in a proper bookkeeping software with permission structures built in. You might want your bookkeeper to see and edit everything, but probably not your part-time office administrator.

2. Microsoft Excel Isn’t Fully In The Cloud

Excel files are typically stored and updated in your computer. Even if you have upgraded to using a cloud storage source like Google Drive, you are usually downloading and updating a version of that file and have to re-upload it every time you make changes. 

Have you ever seen this dreaded pop-up?

Excel corrupted file pop-up

If your bookkeeping information is in a corrupted file it may be gone forever. Seeing this pop up when you’re trying to access your financial data would drive anyone to tears (trust us, we’ve seen a thing or two). 

Whether it’s a corrupted file, a computer virus, or maybe even an employee entering incorrect information onto a spreadsheet; if you’re using Microsoft Excel and storing your data locally, any of these events could have a devastating effect on your business.

Who Owns It?

The other big problem with Excel not being fully in the cloud comes from the idea of the master spreadsheet. As we mentioned above, even when properly stored in the cloud you may need to download your spreadsheet every time you want to make an edit. Even with the advancements of co-authoring a spreadsheet, you’ll still need to upload a copy of the worksheet. 

What if you and someone from your team are working in different versions of the same spreadsheet? You might inadvertently open a read-only copy, work for 5 hours on your bank reconciliations, and then discover that your partner left the spreadsheet open on their laptop. Which means none of your hard work will be saved. At that point, some cursing of Excel and tears are completely fair. Better to avoid it completely and switch to a bookkeeping software

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3. You Have to Tell Excel to Auto-Save

If you’re using Excel and your computer dies, there’s a network outage, or any other various technology snafu strikes, you’ll spend time hunting down your IT person and then begging them to find your work somewhere. Anywhere. Cloud-based accounting makes all of this stress a thing of the past. Your work will always be saved and always be there, safely accessible whenever you need it.

Microsoft Office 365 does have an auto-save feature added in, and you can use it in some versions of Excel. To do so, you’ll have to go into the settings to turn it on which means further configuring a system that wasn’t designed to be your accounting file.

4. Excel Can’t Build The Reports You Really Need

Excel does have some cool functions. It’s a great tool for housing data. It’s not a great tool for bookkeeping and as a business owner, you deserve better. The ability to create financial documents—like your balance sheet or income statement—is vital to small business owners. Most accounting software will also handle things like your accounts receivable, or your profit and loss statement

If you’ve been handling your bookkeeping in Excel you’re probably using a single-entry bookkeeping system, because the double-entry bookkeeping system is difficult to use in Excel. Double-entry bookkeeping is ideal for all businesses because it lists each transaction in two accounts (from your chart of accounts), helping you spot errors quickly and analyze the data in your accounting file. 

The only benefit to single-entry accounting over double-entry in your business is, well, there aren’t any. As a business owner, you should really be using the double-entry accounting system.  

5. Excel Can’t Check for Human Error

In accounting, one misplaced decimal can make a big difference. Excel spreadsheets don’t have the built in check against manual errors that accounting software does. In accounting software, you are filling in information and your work has to match up against your bank feeds. What you’re doing is reconciled against real results. 

If you’re doing this same work in a spreadsheet, you’re starting from scratch and the possibility for simple but compounding errors gets much larger. Those same errors are also harder to find in a sea of Excel cells. 

Business owners need accurate information all of the time, Excel was built to simply house data and doesn’t allow all of the functionality of accuracy that accounting software does. 

6. Excel Can’t Import Your Bank Feeds

You can’t import data from your bank accounts into Excel. Every month you (or someone on your team) have to carve out precious time to manually enter in all of the data for each and every business credit card and bank account you have. Every month. Bleh. 

Aside from the manual work of entering your bank feed information, Excel accounting spreadsheets also can’t integrate with your other business tools to paint one beautifully digestible snapshot of your business finances. This leaves you flying blind to make business decisions without all of the important information you need from financial statements. Or, worse, spending time you could be using to grow your business or serve your customers to manually paint yourself that snapshot.

7. Excel Templates Aren’t Finance Experts

One of the most important attributes of all business owners is the ability to ask for help, and knowing when you need it can be a challenge. Excel isn’t a finance software so when you need the help of a finance expert, you’ll want an accounting file they can access quickly, easily, and without spending hours of their time (that will certainly be billed back to you) fixing work you’ve already put into it.

8. Free Excel Bookkeeping Templates Won’t Save You Time or Money

If you are worried about saving money, this is a double-edged sword for your business expenses. There are free Excel bookkeeping templates but the time you spent to implement them certainly isn’t. You’ll end up trading valuable time you could be spending to grow your business to search online for tips and tricks to use this tool in a way it simply wasn’t built for—this might even be how you ended up here today. 

Once you’ve finished your bookkeeping tasks and you need an accountant to help you analyze the numbers you’ll end up paying a premium for your accountant’s time, in the long run. They’ll have to do a lot of extra work to help analyze the data you’ve housed in your Excel file. In reality, a proper accounting software will do a lot of that accountant’s work automatically.

9. Excel Can’t Predict Cash Flow 

The number one killer of small business is cash flow problems. Excel can’t look forward to help predict cash flow and what you should do to prepare for the highs and lows of it. Things like daily bookkeeping, which can help keep your business finances on track with the latest information, simply aren’t feasible in Excel. Don’t make it harder on yourself to create a business forecast and budget.  

You wouldn’t climb Mount Everest without the proper tools and you shouldn’t take on the business world with Excel as your accounting file. Your finances are the building blocks of your business and without a strong handle on what is happening in your books you can’t make strategic decisions for the future. Learn more about how our bookkeeping software can help take your business to the next level.

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