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Accounting Software vs. Spreadsheets: A Guide for Small Businesses

Published

4 years ago

07/25/2021

Kossi Adzo

Starting a small business can leave you with a lot of decisions to make. One of these decisions will be how you decide to manage your finances, which you might be feeling the pressure to get right.

Many start-ups will be naturally drawn towards spreadsheets, a familiar and low-cost solution that will help them get off on the right foot. But if you really want to take your new venture seriously, you should consider accounting software for small businesses.

Not convinced it’s an investment you need to make? Here are some ways that software compares to spreadsheets.

Table of Contents

Accuracy

Spreadsheets are often an accident waiting to happen. One simple miscalculation or incorrect formula can send your books into chaos. Worse still, you may end up paying too little tax or undercharging clients if issues go unnoticed. Even the most careful accountant is ultimately human, making slip-ups a part of life. Accounting software calculates everything for you, deducting tax automatically and processing invoices with one simple click. You’ll never have to worry about typing a 5 instead of a 3 again, giving you increased peace of mind.

Security

Have you password protected your spreadsheets? Unfortunately, even this won’t be enough to keep out a determined hacker. You might think that by keeping your accounts on your laptop’s hard drive they’ll be safe from cybercrime, but this just isn’t the case. Criminals can access files on your computer through the internet, even if they aren’t stored online.

Accounting software is equipped with all the latest security features to keep your data safe from prying eyes. Not only will your files be password protected, but encryption and in-built virus protection can keep all your sensitive information even safer.

Shareability

Spreadsheets aren’t always the easiest to share between your employees. USB sticks can be prone to getting lost and e-mail may not be able to handle bigger files. What’s more, when someone makes a change, they’ll have to send the spreadsheet back around to everyone so they can see the most up-to-date sheet. There’s always the risk that your accounts will be forwarded to the wrong person as well, which has the potential to be disastrous.

You’ll be able to share your books with multiple people in real-time when using accounting software. All edits will be updated automatically and everyone will be given a password to access the areas relevant to them. If you link your payroll to your accounting software then employees will be able to easily update their own details as well.

Lease Accounting Can Be Difficult Without Software

Lease accounting is a particularly tricky element of accounting to work out on a spreadsheet. Especially as the lease accounting standards are often updated, recently with the introduction of ASC 842 for USA GAAP following businesses. Leases now need to be mainly entered onto the balance sheet, whereas before ASC 842 a whole lot of them could be counted as “off-balance sheet activities”. Whether your business is small or large, if you’ve got a larger quantity of lease arrangements, either as the lessor or lessee, you could probably benefit from ACS 842 lease accounting software to make sure you’ve accounted for your lease arrangements properly. It can of course, give you peace of mind and allow you to know that you’re compliant with the latest lease accounting updates. ASC 842 lease accounting software is also used by a lot of accountants, so if you want to make sure your accountant is super compliant, it can be good practice to ask how they’re accounting for leases. If they’re using a spreadsheet over lease accounting software they might be using the old methods.

Is the Cost Worth it?

Even with all these benefits, some small businesses may still be worried about the cost of accounting software. But many types of software can be paid on a monthly subscription basis, meaning there’s no need for a large sum upfront. Depending on your needs, you’ll be able to choose a plan that suits your start-up. This might mean opting for a more basic package to begin and then upgrading as your business grows.