Many small business owners choose to use Microsoft Excel for their financial recordkeeping when they first start out. While Excel is an excellent tool for organizing large sets of data, it has its shortcomings when used as an accounting application.
You might find that Excel spreadsheets works fine when your business operations are simple. You can keep track of your revenue versus expenses and get a sense of where your cashflow stands. But as your business grows, there will be more and more you’ll need to record. A regular spreadsheet can quickly evolve into a cluttered mess that is difficult to extract actionable information from.
Excel spreadsheets are also vulnerable to human error because manual data entry is required. Punching the incorrect number key, entering a figure into the wrong cell, or including a transaction more than once can completely derail your records. Even worse, Excel doesn’t have the functionality to identify exactly where the error occurred or which user inputted it. That’s left to you as the business owner to determine.
Imagine discovering that you have significantly less in the bank than your accounting records indicate. Not only is this disheartening but it’s scary to think of the harm it could cause your business. You’ll have to work back through your spreadsheet to pinpoint and correct the error. If there are other people participating in your accounting process, you might wonder if it was a honest mistake or if there is something malicious going on with your funds. Perhaps scariest of all is that it could happen again, without warning.
The good news is that accounting software is free of these limitations. It provides the same insights Excel does when your business is young and uncomplicated but also scales as your operations become more complex.
Cloud accounting software has the advantage of automatically pulling data from a variety of sources. Xero connects with your bank account so your daily transactions flow right into your ledger. It also integrates and shares data with hundreds of other software providers that serve small businesses, including Stitch Labs. When a customer makes a purchase, the order details import from Stitch Labs directly into Xero.
Automatic data entry means that immense time can be saved and human error is a non-factor. All Xero plans come with unlimited user logins but the account administrator can restrict access so you have peace of mind that important numbers aren’t accessible to everyone. It also has an audit trail that shows who made certain changes and when, providing reassurance that your books aren’t being altered to cover up fraud.
Your accounting application should be easy to use, require minimal time and provide insight into you the financial health of the business. To learn more about the benefits of cloud accounting over Excel, read the Xero Small Business Guide.
This was a guest post by the Xero team. Check out their beautiful accounting software over at www.xero.com and discover how integrated inventory and accountion solutions make for smarter business.