A critical part of running a small business is managing your accounting. Not only do you need to manage the bookkeeping – the recording and organising of your financial data such as invoicing, expenses, payments and payroll – you also need to manage your accounts – the presentation and interpretation of that financial data including preparing tax returns, generating reports and forecasts, and auditing. So, which is the best way to record your financial information if you’re a SME? Should small businesses use simple spreadsheet accounting or invest in an accounting software package?
Bookkeeping and accountancy tasks for SMEs
There are certain steps that almost every small business needs to take to run a financially healthy and compliant business. Therefore, it is important to get the basics right from the start and to record and monitor all of your financial transactions. Even if you’re not from a financial background or if you have a fear of numbers, you still need to understand your business financials. It’s also a legal requirement.
The benefits of an accounting system for a SME
An accounting system is a package of software that you purchase the right to use. Today, these are often cloud-based, which means it is stored off-site on a remote server. The benefits of using an accounting system are that they are cost-effective, can be simple to use, are secure, and when populated correctly, they can provide all the relevant financial information you need at a click of a button.
Here’s a fuller list of benefits:
- Access for anyone, anywhere and anytime – You can nominate anyone to access your data from any device when it suits you. This means that you have up-to-date information at your fingertips that’s available to everyone in your company that needs it. You can even give access to your accountant.
- Real time information – See your cash flow, who’s paid you, your profit and loss overview, and tax liabilities whenever you want to.
- Customise your system to suit your business – Customise your package with extra add-ons so you get the information you need.
- Secure information – No one can access your data on your cloud system unless they have the login to your account.
- Integration with your bank accounts – most packages allow daily bank feeds into your cloud accounting applications to ensure that you have the very latest information.
The difficulties of using software package
Of course, there are costs associated with using software, here are just three of them to consider.
- Software is often more complex than using a spreadsheet and may require a steep learning curve to understand how to use it.
- Software cannot be used offline so you must have an internet connection to access it.
- You have to invest time and money into using software – the subscription costs vary depending on which software you use. But the cost of subscription vs cost of your time argument may make this a benefit rather than a negative!
The benefits of using a spreadsheet for a small business
A simple spreadsheet, for example, on excel or google sheets can work brilliantly for a SME if you have minimal transactions, or you’re not tech savvy. A spreadsheet allows you to manually create your financial records, which can be stored and accessed easily whenever you need them. Most spreadsheets are free to use. All data has to be input manually but this means that you can have a very detailed view of your finances, if this is what you need. It also means that you recognise and can ‘feel’ the weight of a transaction, particularly if it is a large outgoing: very similar to the feeling of using cash instead of a credit card. This emotional response can mean that you are more in tune with your expenses – and income – which is great if you are managing your business for growth or for survival.
The negatives of using a spreadsheet for a small business
- There is room for human error such as forgetting to input a transaction or typing a wrong number. This means inaccurate data.
- Spreadsheets can’t link to your bank account or credit card account.
- Because you are inputting manually, it will probably take you longer to do, which takes you away from your business.
- Spreadsheets can’t automatically send invoices or run payroll, as software can do.
Which is better – a spreadsheet or a software accounting package?
Due to the long list of benefits of accounting software that we’ve posted above, you may feel that we prefer accounting software. But we firmly believe that for some of our clients, a spreadsheet delivers exactly what these SMEs need and there is no point paying the monthly subscription fees to use software.
So, the answer to what is best – accountancy software or a spreadsheet – is ‘horses for courses’. It is whichever works best for you and your business.
How can we help?
The HB team is always available to support your accountancy needs and discuss ways to boost your productivity.
If you’d like to discuss whether a spreadsheet or accountancy software is best for you and your business, why not give us a call and let’s talk about it. And if you need help setting up new spreadsheets or software, we may be able to assist you there too!
If you would like to learn more about the services that we offer, discover how we can give you real confidence in the future of your business, or if you are a larger business that requires auditing, then contact us today. We’re accountants for business and we are here to help you grow efficiently.
The information contained above is for general guidance purposes only. Whilst every effort has been made to ensure the contents are accurate, please note that each individual has different circumstances and it is essential that you seek appropriate professional advice before you act on any of the information contained herein. HB Accountants can accept no liability for any errors or omission or for any person acting on or refraining from acting on the information provided in the above
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