Still doing all the company’s accounting in Excel?
10 years ago, Excel might have been the golden standard. Those days are long gone. Sticking to the old system can lead to inaccuracies, longer workloads, and system errors.
Even big companies make accounting errors on the regular. Most of the time, these errors arise due to the use of older software.
We’re not saying this to scare you, but that’s reality. We’re here to tell you how to reduce the risks of making mistakes, though.
The first step is to stop accounting in Excel and instead use an accounting software. Why so? Read on and see why using a software trumps Excel at all fronts.
Why You Should Stop Accounting in Excel
Many businesses still use Microsoft Excel for accounting purposes these days. In fact, it’s the software of choice of many startups and small businesses. Why?
It’s because Excel is familiar and it has worked for many other companies so far. It has been a useful tool for many years. But, it’s not a long-term solution and better options are now available.
The spreadsheets you create using this software aren’t viable for long-term use, especially if you have to maintain several of them to keep your system working. Furthermore, it becomes more prone to mistakes as time goes on.
What’s a good alternative, then?
Why Use an Accounting Software Instead
An accounting software takes care of, as the name suggests, your accounting work. It takes the guesswork out, leaving behind a functional and efficient system for you.
Why use it and not Excel? Well, aside from it being a software which focuses on providing your accounting needs, it has a lot of other advantages over Excel. Read on to see why you should buy one instead.
1. It Takes Little Time to Master
A startup accounting software is easy to learn; it automates many processes, and it handles the mathematical aspects of accounting on its own.
On the other hand, Excel requires a higher level of skill to do it the right way. You have to spend a lot of time learning about the formulas and such to create a functional spreadsheet. Then, you need some more time to create a functional system.
You have to know which formulas to use, and you have to enter them yourself. Learning how to use it is like learning a new programming language.
If you’re not doing it yourself, you open more vulnerabilities in your system. After all, many employees like lying about their Excel skills during the interview.
2. It Reduces Risks for Mistakes
Because the processes are automatic, the risk of errors goes down by a significant margin. Manual processes put your system at higher risks as the chances to make mistakes are also higher.
You may put an extra 0 in one of the figures. You may use the wrong formula. You may have copied a cell with a formula, resulting in an error when you paste it somewhere else.
Take JP Morgan, for example, which ordered an analyst to develop a new value-at-risk model. This model used Excel spreadsheets.
The bad news is not only is it not automated, but it also had a formula mistake. This ended up costing the company billions of euros.
There are more chances to make a mistake in Excel. On an accounting software, you only need to worry about errors on data entry.
3. It Can Spot a Mistake as They Happen
If you do make a mistake, an accounting software can spot it and alert you. It can highlight mistakes, allowing you to rectify the issue right away so you don’t end up like JP Morgan. Moreover, it doesn’t let you even input incorrect data, such as credit-debit mistakes.
Excel doesn’t know whether the data is correct or not. It only does as it’s told and then reports an error if the inserted data is not recognizable. Beyond this, it’s up to you to assess whether there’s an error if something doesn’t match.
If the figures aren’t right, it’s also up to you to determine where the error is. It might be one incorrect data someone entered on another table. It might even be a series of incorrect values.
Formulas are easy to mess up, too, so you also have to check each one.
4. It Provides Data Consistency
Changed a value in one record? Then, you should also change it on all other records to ensure data consistency. Even one wrong information can throw the system out of the loop.
Depending on your Excel process, you may have to do some manual work to complete this task. Otherwise, you risk making more mistakes.
A software does this for you, so you don’t even have to worry about how up-to-date your records are. You don’t even need to keep track of your records.
5. It Offers More Security
Data should always be safe and secure, but is Excel providing enough security for your data? Chances are, it isn’t.
It has a higher risk of falling into the wrong hands. This then allows others to take a peek at your company’s transactions or even manipulate it. With an accounting software, you know the data is safe since only a select few can access it.
Even if no one is out to get your company’s financial data, you risk losing them to system outages or even viruses. What would you do if a virus wiped out all your information on all computers?
You might have some version saved on emails, but it may not be up-to-date. Not all files would also be available. A cloud accounting software solves this issue.
6. It’s Great for Planning and Forecasting
Excel is time-consuming, giving you less time to do the forecasting work and re-adjust it if need be. By the time you complete the process, the figures might even be out-of-date.
This might result in skipping some important processes only to finish on time. You know what happens when you rush your work – you end up with inconsistencies and inaccurate assumptions.
This is why Excel isn’t feasible for planning and forecasting. On the other hand, an accounting software provides ready financial reports for your assessment.
This allows you to work fast with enough time to take closer looks at the provided data while also reducing mistakes and risks of wrong assumptions.
7. It Can Provide Reports and Data as You Wish
On that note, an accounting software can compile the data and give them to you as you need. It can generate a profit and loss sheet, your income statement, a balance sheet, and more. It can even break down reports by item or vendor among other functions.
When accounting using Excel, you have to generate these reports by hand. You have to get all the data you need for each report from different spreadsheets, analyze them, and then compile them all to form one report.
Not only is this time-consuming, but it also provides more chances to make mistakes. Copy-pasting and manual input of several data can lead to a disaster.
8. It Integrates with Other Business Apps
To further automate the process of feeding data into your accounting software, why not integrate it with other business applications, too? Yes, you should be able to do integrate it with programs like an inventory manager, timesheets, invoicing, and more.
Excel is still a useful program, though, so if you need it for further analysis, you can also integrate it with your software of choice. You can sync it with your CRM, too, and even PayPal, Amazon, Salesforce, and more.
Everything you need is in one place, and you won’t need to handle different accounts. Every piece of information is always up-to-date. As we’ve also said above, you get easier access to a variety of reports, whichever you need.
9. It Maintains an Audit Trail
A human error in spreadsheet accounting will happen at some point, and you need someone to hold accountable for the mistake. But, pinpointing the exact person who made the mistake can be hard. This is especially true if several people have access to the file.
Furthermore, it’s pretty easy to change the values in a table without anyone knowing you’re the one who did it. This is why a spreadsheet is easy to target those with malicious intent.
With an accounting software, it’s easy to keep track of who did what and when. It also records every business transaction, employee salary, and even sales contracts. Because you can automate these processes, there’s less room for a human to make an error or commit fraud.
Make Accounting Easier with Good Software
Of course, you need good accounting software in the first place. Contact us now to learn more about ScaleFactor, a modern accounting solution who automates tasks for you.
If you’re still accounting in Excel, talk to us. Let’s discuss how you can migrate to our software with ease and without mistakes.