Are you caught up in a tussle over which accounting solution to choose for your small business? Cannot decide on whether to invest in a cloud-based accounting solution or get going with Google spreadsheets or Microsoft Excel? Or, are you thinking of leaving the entire matter to a full-time accountant? Allow us to walk you through all these options to help you choose your best alternative.
1. Hiring a full-time accountant is a good option but a hefty investment if you are just starting out. However, you would require professional assistance eventually, especially during tax season. So, it helps to be on a contractual term with an accountant.
2. Microsoft Excel is a cheap alternative but not a convenient tool if you are looking for ways to be self-reliant with your accounting tasks, at least initially.
3. Microsoft Excel online is a free tool (or you could get a Microsoft 365 subscription at a reasonable price) and could be an alternative to Google spreadsheets if you are looking for collaborative support. However, it has certain limitations even in terms of collaboration. More importantly, you would be barred from generating an extensive list of charts for your business finance statuses and forecasts. You cannot get data from external sources. It is also missing in features such as advanced filtering and timeline options for your projects.
4. Google spreadsheet is better than excel in that it is accessible online but has many limitations that might come in the way of smooth and fast operations. For example, Google sheets have a limited number of data visualization options. It is also not an ideal tool for big and complex data. Moreover, Google spreadsheets will host your financial data in the public cloud, which may not be a safe option.
5. A cloud-based accounting solution is very secure as data is hosted in the private cloud. Plus, you can use it to produce fast results any time and from anywhere without doing much.
Through a comparative study we are going to discuss how a cloud-based accounting and invoicing software fares better than Spreadsheets in more ways than one.
It is an open secret that many users in India use the duplicate/free version of Microsoft. Even if someone uses an original version, it was most likely pre-installed and included in the price of the desktop/laptop. Therefore, Excel is seemingly a great bargain even with an Office 365 subscription.
But here is the catch.
Excel is not a handy tool for something as layered as business accounting even if it is very small. With the bulk of data entry at your disposal, it is very easy to make mistakes with Excel. In an urge to save a couple of thousands, you can lose more by making the smallest of mistakes. In fact, big organizations have suffered this fate.
In the year 2012 the organizing committee for the London Olympics made a very small typographical error on the excel sheet. There were 10,000 tickets available for a swimming competition. But someone enterer 20,000 by mistake and ended up selling 10,000 extra tickets beyond capacity. The outcome was as embarrassing as it was hefty.
To err is human, and you might make the following mistakes on an Excel sheet:
Why wouldn’t you make the same mistakes on accounting software? Because, it provides you with an option to search and select associated data as opposed to entering them manually on an excel sheet, each time a new customer/purchase invoice is created.
Now, compiling all business data and entering them on a spreadsheet one by one is a huge task if done manually. But with most smart accounting solutions you can simply import existing invoices, bills, customer/product data etc via CSV files and forget about making copy/paste mistakes.
With modern spreadsheets you can modify a data and have it automatically updated on the relevant spreadsheets of other users. However, spreadsheets individually cannot communicate. This means, you still must maintain something like a double-entry journal or stocks by hand.
A smart accounting software is a better option in that it automates not only journal entry or stock management, it simplifies 90% of receipts and payment allocation by establishing a direct connection to your bank feeds. This also means super fast and error-free bank reconciliation.
Hampers Consolidated Operations
In terms of working in a collaborative environment and streamlining data, a cloud-based accounting solution provides better operative convenience than its spreadsheet-based counterparts, both offline and online.
First, even if you are using the online version of Microsoft Excel, the fact remains that spreadsheets work in siloes. This means you must maintain separate spreadsheets for separate accounting functions. Spreadsheets cannot communicate with each other and therefore cannot automatically update, for example, stock, or Income and Expense statements, based on Customer and Purchase invoice entry. You must make the updates by yourself. On top of that, tracking expenses, assets, liabilities, equities, reserves, incomes et al in separate spreadsheets is a time-consuming and overwhelming task, and prone to errors.
Second, Microsoft Excel online supports collaborative work but there are certain limitations to that too.
A cloud-based accounting software, on the other hand, allows you to collaborate smoothly with team members and staff. You can add multiple users and set up access control for each. Users can log in from anywhere and work on the same spreadsheets simultaneously. You can get detailed reports of their activities by running an Audit Trail report. You can manage your books from a single place. Your dashboard reflects an overview of the year to date turnover, the total number of invoices raised, overdue invoice/payments and all you need to get a bird’s eye view of your business health.
Another advantage of cloud-based software is that there is always room for web-based integrations and add-ons. So, you can pull data from various web-based sources such as banks, ERP solutions etc. Moreover, it is scalable, and you can automatically get access to new software features.
There is a learning curve associated with the management of spreadsheets, irrespective of whether you are using an online or offline version. You need to acquire programming expertise to generate financial reports. Even basic accounting demands extensive knowledge of formulas, filters, data connections etc. That is why for a long time it has remained the prerogative of accounting professionals.
Despite getting yourself an accounting template, you might have to manually tweak it to get the desired result. Now, that is a tedious task. Creating invoices using Excel is also a time-taking task as you cannot send invoices to customers directly from the Excel sheet. You must copy and paste the details onto a word file or a similar invoice template before sending it to your customer. You may create an invoice template inside Excel but then it may not look professional.
With a cloud-based accounting and invoicing software you do not have to have a professional degree to manage your books. Almost everything is built-in and automatic. If you know the basics of accounting, you can set up your own business. You can depend on it for GST calculations as well. All you need to do is select the GST rates and the system automatically calculates your dues. Accounting software is built commensurate with national accounting standards. Even if you miss out on mandatory data while, let us say, filling out an invoice, the software will trigger an alert. With ‘Quick’ or ‘Recurring’ features you can handle invoices, credit notes, purchase orders in bulk and automate the generation of customer/purchase invoices that recur on specified dates.
Spreadsheets cannot answer questions
Can you run a report on an Excel sheet with just the click of a button? Data analysis is not only a time-taking task, it also requires expertise. Now, wouldn’t you rather concentrate on managing your business than analysing hordes of data on Excel sheets to figure out profit margin, balancing assets, and liabilities? If you are just starting out and tight on budget, you cannot depend on a full-time accountant to generate all the reports. And, without financial reports how would you make sound business decisions?
To get an in-depth knowledge of your cash flow status, break-even points, profit and loss figures get a cloud-based accounting solution that can create an extensive number of reports at your convenience with just a click. You can generate quick reports pertaining to:
Historical data loss
Assuming your business has a future vision, you must give due diligence to the preservation of historical data from the very beginning. You may not have a requirement of evaluating financial trends now, but in the future, you might have to. Microsoft spreadsheets cannot save information that expands over years. This will cause a roadblock while preparing budgets or while looking into the company forecast. Modern-day accounting software comes with features to prepare forecasts and budgets without any manual intervention. It also helps in case you are summoned for an audit and you are required to show a past transactional history.
A cloud-based accounting and invoicing software is conducive to smooth, fast, and self-supporting accounting. But what about the price? Well, you can get a monthly subscription-based modern accounting tool at an affordable price. Some even come with a free software version with a limited number of transactions per month. The pricing plans usually depend on the number of users and businesses. You can choose a plan best suited to your needs. Plus, the time and manpower that a smart accounting solution helps you save makes it worth the small investment.