Accounting has always been a core part of any business, as it provides a complete picture of a business’s financial position. The process is necessary for sound financial management. It enables businesses to keep a record of income and expenditure, which helps in making financial decisions.
Businesses especially small businesses start out with Excel, but that’s only feasible up to a certain point of time. As your business grows, it required an accounting software to run a business smoothly.
Spreadsheets have been a preferred method of recording the company’s financial data because it is cost-effective, offer multiple worksheets to work on it, and perhaps most appealing to small businesses as it is free to use.
As nice as it sounds, as your business grows its limitations emerge. Spreadsheets come with some shortcomings that can hinder your accounting process. The problem is the manual labor and risk of error that can cause irrecoverable damage at some point of a line.
If your business is growing too fast that you can’t manually keep track of all financial records or you’re tired of manual accounting, then it may be time to switch to accounting software.
There are many accounting software options available for small businesses to choose from. But first, let’s take a look at why spreadsheets are not a great long-term solution for small businesses.
Here are five reasons why you should switch away from spreadsheets.
A University of Hawaii study found that 88 percent of spreadsheets contain errors. A small typing error could lead to a huge mistake like false Profit & Loss statement, incorrect income tax return, and many more.
A risk to lose data
Past records are valuable for analysis and for auditing. But larger the spreadsheets, the more likely they are prone to risk. The possibility of losing data in the spreadsheet is very high because backing up and restoring spreadsheet is quite challenging.
Lack of integration
The spreadsheet has poor integration. Users face performance issues when they work with a large amount of data, link one file with another or combine lots of worksheets. It also doesn’t integrate with other small business applications like inventory management applications.
There’s no audit trail
Spreadsheet data can be easily altered by anyone because it is easy to change information and hard to identify who made that change. Spreadsheets lack security and visibility around change.
High labor requirement
It takes time to update the spreadsheet, the more data you are working with, the slower it becomes. You or your team could be spending hours or days to prepare spreadsheet reports that could be done in minutes using accounting software.
How to Find the Right Accounting Software for Your Small Business
Choosing the right accounting software is an important decision. There are many accounting software options available in the market, ranging from free software to an expensive one. So how do you know which one is right for your business?
The key is to identify your needs and choose the software accordingly. To make it more clear, consider the following points/questions:
- How many people need to use the software?
- Does it have all the functionality which you require?
- Does it allow integration with other software?
- Are the training and support provided?
- Is the software flexible enough to grow with your business?
- What is the annual cost?
- Check out the review.
- Take the trail before purchasing it.
- Ask the opinion of your accountant.
- Inquiry for post-sale service.
Once you identify all your needs, select 4-5 options and take demos to evaluate and compare all of them. Then select the most suitable software for your business.
Tips for Making the Transition
Now it is time to switch from a spreadsheet to accounting software. But how do you make the transition? This can be a challenging task if you have years of data. So here are some tips to get you away and make it a seamless process:
- Migrate all of your existing data from the spreadsheet to the new accounting software.
- Start your learning from the basis, don’t directly jump into advanced functionality.
- Continue using both spreadsheets and the new software for the first full accounting period. The spreadsheet works as a backup if any issue arises with the software or you stuck in between.
- Ask for training and support provided by the software vendor, if and when required, it will smooth the transition.
- Try to work more and more on the software, it will make you familiar with all the features of software faster.
Initially, the spreadsheet may be suitable for your business. But as your business grows, it would be tough for you to work on the spreadsheet and you need to move to accounting software.
Choosing the right tool will reduce manual work, enhance collaboration, and allow you to make important business decisions faster especially finance-related decisions.
Have any tips on how to transition from spreadsheet to software? Leave a comment in the comment box.