Imagine the scene. You have successfully started your own business and you are actually starting bringing in sales. You know you need to start taking control of the paperwork as invoices are mounting. So you start to explore options for setting up your Accounts.
The first thing you are likely to consider is can I do it myself? I have basic spreadsheet knowledge and it can’t be that hard. A word of warning on using spreadsheets to manage a growing business!
First question to ask yourself is: Where is my time best spent?
Assess your skill and knowledge
Listing out the jobs that you need to perform to create accounts might help. The following are common accounts functionalities that any business needs to perform.
- Create Invoices for customers and follow up on past due accounts
- Enter deposits and payments
- Enter payables and receivables
- Reconcile all bank and credit card accounts
- Create monthly profit and loss and balance sheet statements
- Create monthly inventory, sales, and other reports
Once your business is really starting to grow, these tasks can take an inordinate amount of time. In addition a certain amount of knowledge and skill is required in following up this procedures accurately. Knowledge of excel at a basic level is relatively easy to acquire but as your business grows you will increasingly need the advanced functionality. Are you better working through a mire of spreadsheets formulas or focusing on growing your business which is your real passion?
Spreadsheets were not intended for accounts
Yes, spreadsheets can hold your financial data but they can not raise an invoice and make the correct checks to ensure the process has been carried out correctly making it a time consuming and error prone task. Online accounting packages have pre-set formats for creating invoices, creating P&L and nominal ledger information without you having to construct the whole template from scratch.
Furthermore, online accounting packages have the advantage of providing checks and balances to make sure that you have carried out everything correctly.
One version of the truth
One of the risks with using spreadsheets is posting figures accurately into the correct columns. Basing predictions for the future on error prone calculations can be a costly problem to have. There may also be a lack of clarity about how to categorise certain items or expenses amongst your team members. Lack of clarity and errors in general dissuade a lot of business owners from trying to manage their own accounts. By using a cloud computing tool, there is one version of the truth, that can be accessed, reviewed and checked by everyone on the team.
Sharing excel spreadsheets can be problematic. The most common problem is that there are different versions of a Master spreadsheet available and once you start sharing them with other team members who make amendments you lose control of the entire work process. Furthermore, this makes it difficult to understand who has done what to the spreadsheet and thus you have a questionable audit trail. Keeping all workflow in one place is an absolute essential when it comes to managing the myriad of potential transactions in a set of accounts.
So think twice before you delve into excel and compare the costs of moving to the cloud with the time that you will invest in trying to streamline your own accounting workflow!