Spreadsheets or software: what’s best for your business finances?

You probably didn’t start a business to spend hours every month doing your accounts - although no judgement if you just love accounts! So with a new tax year coming round, how can you adjust your bookkeeping to lighten your workload? 

First, you’ve got to find the right process for your business - spreadsheets or software? It’s not one size fits all, and it might even change over time, as your business grows and evolves. So at least once a year, it’s a good idea to weigh up your accounting method and check it’s still fit for purpose.

Why choose spreadsheets?

You know exactly what you’re getting when you open up a spreadsheet. You’ve probably used Microsoft Excel or Google Sheets before, and that’s one reason why lots of small businesses start their accounts in these. 

Quick setup

When you first start your business, you’ll have a lot of processes to get set up, so your accounting might be an afterthought. Spreadsheets tend to be quick and easy to create, so you can pop your initial start-up costs into a simple table and add to it as and when you need. It’s a pretty short learning curve to create a working spreadsheet, which means that you can likely start a brand new spreadsheet for your business and get it working without having to learn too many new processes.  

Low cost

As a small business owner, you might have to absorb a lot of costs related to your business, especially before sales become more consistent. That makes any savings very welcome! You can access some spreadsheets free or for a minimal cost, so this can help to reduce your overheads. 

Customisable

With a little time to get your head round spreadsheet formulae, you can set up some powerful calculations which give you the information your business needs. Plus, if there’s any information you don’t need, you don’t have to clutter your sheet with it. Just leave it off - you’re in control.

The limitations of spreadsheets

Time-consuming

While setup can be fairly speedy with a spreadsheet, maintaining one becomes much more time-consuming. You’ll have to manually enter most of your business sales and costs, which can quickly consume hours of your time. Similarly, if you want new reports or charts, you’ll have to create these yourself.

Mistakes happen

Mistakes in your accounts can be pretty minor, but some miscalculations can throw off your business planning pretty significantly. And mistakes are much more likely to happen when you’re manually entering a lot of data every month and creating your own formulae to add up the numbers. If you have an accountant, they’re likely to spot significant errors in your calculations, but it can still be a pain to fix after the fact.

Difficult to scale

Due to the amount of manual work involved in spreadsheets, they can slow you down exactly when your business is taking off. The minute your business finances get more complex, you’ll find yourself searching through multiple sheets for one specific transaction - or typing up lots of data. And there are some things that spreadsheets just weren’t designed for, like running payroll when you take on an employee. 

Why choose accounting software?

Some businesses start out with software, but others make the move after encountering some of the limitations of spreadsheets. 

Time-saving 

When you’re running your own business, one of the most precious things is time. Accounting software has lots of automations built in to save you time including calculating how much tax you owe, categorising bank transactions to match sales and costs, and creating reports to show you how your business is doing. Take a look at some of FreeAgent’s most useful time-saving automations. 

Here's how FreeAgent matches bank transactions with invoices and expense categories for you to approve.

Scalable 

Once your business starts to gain traction, your accounting needs get increasingly complex. With more customers, sales and bills to manage, you can find a lot of your time is spent balancing spreadsheets and importing data rather than working on your business. 

Accounting software scales with you, allowing you to categorise transactions in bulk, calculating your VAT returns, chasing late invoices for you and much more. If your business hires people, you can use accounting software like FreeAgent to run payroll, without needing to source new software.  

MTD-compliant

If your business is based in the UK, then you’ll need to know about Making Tax Digital (MTD). VAT-registered businesses have to keep digital records and submit returns electronically. This means you’re legally required to use MTD-compatible accounting software, like FreeAgent, to keep and submit your quarterly VAT returns. 

Other businesses aren’t required to keep digital records yet, but self-employed individuals and landlords with income over £50,000 will need to register for Making Tax Digital and use MTD-compatible software by April 2026. You can find out more about the government’s Making Tax Digital for Income Tax plans on our website.

Easy to find data

As your business gets older, you might find your storage system becoming increasingly complex - a physical receipt folder, documents on your computer, a spreadsheet or two, and even some documents lost in your Downloads folder.

Accounting software helps you store everything in one place. You can use it to generate and store invoices, add contact information for clients and suppliers, snap photos of your receipts, import bills and access financial reports. So whatever information you need on your finances, the likelihood is that it’s sitting waiting in your accounting software. In FreeAgent, the Overview screen loaded up with handy charts to give you a quick snapshot of how your business is doing.

Support 

Sometimes owning a small business is lonely work and you might not know who to ask when you’re stuck. With accounting software, you also get the help of a support team who can guide you through sticking points. In the case of FreeAgent, our superstar UK-based support accountants are here to help. 

In terms of your accounts, an accountant is a huge support and can work with you whether you use spreadsheets or software. However, software can make it easier to collaborate with them, as you can both access your accounts at the same time, making changes and updates that are visible in real time. 

The limitations of accounting software

If you’ve never used accounting software before, you might not know what to expect. And there’s a lot of variation in the software you can choose. 

Setup 

While software will save you time in the long run, it can take a little longer to set up at the start. For example, with FreeAgent, you’ll need to enter some information about your business when you sign up, like accounting dates and opening balances. You might want to import some data from your previous accounting method to your account. 

Plus, it always takes a little time to find your way around new software. Luckily, accounting software will usually walk you through how to get started. For example, FreeAgent has lots of detailed guides to help you get to know the software and an expert support team who can answer your questions on chat, email or phone. 

Higher cost

It’s true, accounting software will likely cost you money. The price varies depending on the software you choose, as well as what kind of business you have. It’s up to you to decide whether it's a worthwhile investment for your business. One way to assess this might be to calculate how much time it could save you - if you know what your time’s worth then you’ll know what accounting software could be worth to you. 

It’s worth noting that you may be able to get FreeAgent for free if you have a NatWest, Royal Bank of Scotland, Ulster Bank or Mettle business bank account (optional add-ons may be chargeable). 

Making the move from spreadsheets to software

If the time is right for your business to embrace accounting software, why not try FreeAgent? Find out how quick and easy accounting can be with a 30-day free trial.