Five reasons spreadsheets could be holding back your business
Do you use a spreadsheet to manage your bookkeeping and accounting? If so, it’s likely that you’re not alone - it’s very easy to knock a quick spreadsheet together and use it to track your customers, your stock on hand, etc… but what could you be missing out on by managing your business finances in this way?
Here are five ways that using spreadsheets for your bookkeeping might be holding back your business:
1. Spreadsheets rely on you for everything
The fundamental risk to your business if you’re using spreadsheets to manage your bookkeeping is that you have to do everything. Because you’re building a bookkeeping system from scratch, you have to put everything in place to make sure they’re suitable, accurate, and maintained. Even if you’re not starting from scratch and using one of the many spreadsheet templates out there, you still need to put in the time to find a suitable one and adapt it for your own needs.
When you’re running your own business, your time is your most precious asset - do you want to spend it designing a bookkeeping system, or earning money? Also, as your workload increases, will you have the time to build worksheets that answer the financial questions that you should be asking of your books? It’s hard to keep an eye on your profitability, cash flow, and tax projects if you have to build the infrastructure to get those numbers.
@freeagent Love your software! It's saving me a huge amount of time and hassle.— Maribel Pascual (@Prima_PA) September 30, 2012
2. Spreadsheets can’t create invoices for you (and can’t email them either)
If you’re managing your books with spreadsheets, almost all the information that you need to create an invoice is (hopefully) held somewhere in those spreadsheets. Unfortunately, spreadsheets aren’t designed to quickly produce professional-looking invoices and send them to your clients.
For a lot of people, creating invoices means taking the time to copy and paste data from spreadsheets into a Word template, or maybe even creating an invoice template inside Excel that may not look great, but at least saves the copying and pasting. Either way, your business may be losing out - on the time that you could have spent elsewhere, or on the image of professionalism that your invoice sends to your clients.
Have just generated my first invoice and timesheet with @FreeAgent and it's…beautiful…!— Kristian Glass (@doismellburning) July 4, 2012
3. Spreadsheets can’t talk to your bank
In my days as an accountant in practice, I had a client who tried to keep records of all his money in and out on spreadsheets. He had about six different workbooks, and every year it took me days on end to make them agree back to his bank statements.
Besides an unnecessarily whopping accountancy bill, all that manual work to reconcile bank statements also meant he couldn’t have had any useful information about his business’s cash flow.
Understanding how your business is doing right now (not three months ago or a year ago) is essential to running your business - with up-to-date information coming in directly from your bank and getting auto-reconciled against your invoices and expenses, you can react more quickly to either take advantage of a situation, or to prevent problems further down the line.
@freeagent now does bank feeds for loads more banks inc HSBC! Accounts just got easier again. Geek moment over.— Mark McNulty (@markmcnulty) September 13, 2013
4. Spreadsheets aren’t good at sharing
Have you ever tried to share a spreadsheet with someone? You send them a file… they open it and do some work… you do some work on it while they’re doing that… they return the file… your current file has some work on it that theirs doesn’t… and you’ve got a nightmare on your hands trying to merge the two files. There are some online spreadsheets available like Google Docs, but they’re often missing key functionalities of offline ones.
When you’re working with someone else in your business or just working with your accountant, you probably want to talk to them about what your numbers mean in real time, and from different places. You probably don’t want to spend your time making sure that everyone has the same up-to-date spreadsheet open at the same time.
5. Spreadsheets can’t go everywhere you go
In the same way that spreadsheets aren’t that great for working between multiple people, they’re also not great for working between multiple devices, especially mobile devices. If you have a laptop you do have some freedom of movement, but I’ve never yet been able to work on a fully functional spreadsheet using my tablet or smartphone. And carrying round a laptop feels like a lot of hard work now that I’m used to an iPhone and iPad mini.
This is especially problematic for bookkeeping, because the best time to record an expense or track some time is as it happens - you’re a lot more likely to claim some tax relief for an expense if you can take a picture of the receipt and file it there and then, rather than stuffing it in your wallet and hoping that you’ll get around to it later. Your business is going on wherever you are, but there are some places that spreadsheets just can’t go.
Sitting on a train reconciling accounts with @freeagent because I can!— Deryck Harlick (@FutureDeryck) September 12, 2013
There’s a time and a place for spreadsheets
Spreadsheets are great for tracking simple information and answering quick questions, but they aren’t designed to help you run your business day-to-day. Whether you use FreeAgent or another custom-built app, consider whether switching away from spreadsheets will not just save you a lot of time, but also will give you the up-to-date information that you need to run your business.
Just started using @freeagent for our accounts. Gone are the days of spreadsheets galore. Hello simplicity! Would highly recommend.— Rebecca Mills (@rebecca_aniom) April 25, 2012
- We'll be ready for MTD for VAT, will you?
- Introducing the Spring Statement
- Share the self-employment love this Valentine’s Day!
- Introducing the Customer Sales Report
- Five stages of Self Assessment stress