Bookkeeping on Excel: How to, Alternatives, Why or Why Not

We’ve all been there. We’re trying to get something done quickly so we can focus on what we’re good at. We open up a spreadsheet, start entering some data, and promise ourselves we’ll get a better solution later. Fast forward to two months later and we are trying to fix a formula that spans two sheets, we’re missing data somewhere and we’re down the rabbit hole. Now, imagine doing that, but for tens of transactions per day involving payments, contractors and monthly vs one time costs. This is the reality of trying to do business bookkeeping on Excel.

Why Bookkeeping on Excel Falls Short

Who’s Got the Time?

Bookkeeping on Excel is very slow. Excel was designed for modeling, for tracking and for data manipulation.

Did you know Excel was designed to be understood by a computer, not by people?

Formatting options, merged cells and other tools help us visualize our data, but they are actually detrimental to organization on Excel because it is straying from the structure that the computer was meant to be understanding. This leads to the software being very unfriendly to daily use, and almost impossible to visually audit.

Proper bookkeeping on Excel would require you to create a separate sheet for every account on your chart of accounts – this means that a company with 20 transactions in a month could already be in the 15+ sheet range. You could try to keep it all on one sheet and code the account, but then it would be hard to see if it balances. Keeping track of all of this, as well as generating reports from this data is very impractical and time consuming from a human’s perspective.

To Err is a Human Bookkeeping on Excel

Due to the messy nature and complexity of roll up reports; bookkeeping on Excel also ends up having a high risk of inaccuracy. Auditing excel formulas is complicated, especially between sheets. Not to mention the big issue where Excel does not require you to balance your debits and your credits. No way to make sure you have posted both sides of an entry until you inevitably run into problems, and must then try to find what the transaction was for. Transactions are a single line – no receipts, no memos, no audit trail. Finding the correct Starbucks receipt among your other fifty for your bank reconciliation will be tough.

Didn’t See That one Coming

The last problem with Excel is the lack of insight available to you. Excel can create awesome charts and pivot tables. But this requires raw simple data that will be difficult to produce from your nicely formatted T accounts. And no matter how you go about it, producing a P&L/income statement or Balance sheet will be very difficult indeed, and prone to error. A modern accounting software, well implemented (see our QuickBooks Online setup or Xero Accounting Setup) would have data that can easily be exported to a .csv format and used to create beautiful reports. They also have many built-in options such as roll up income statements, comparatives and payroll summaries which will be invaluable when it comes time to file your taxes.

Our Recommendations

For Bookkeeping: Quickbooks and Xero

Any bookkeeper or accountant worth their salt knows to use pretty much anything aside from Excel as a bookkeeping software. Quickbooks bookkeeping and Xero bookkeeping is a favourite of ours at Entreflow. (Also, we just so happen to have the software implementation team to make it happen for you too.) They’re easy to grasp, and great visuals allow even the greenest of business owners to understand exactly what is going on in their accounts. Ask your bookkeeper or accountant about implementing one of these solutions.

For Reporting: Fathom

If you want to bring in that next level of flair into your next board meeting, we recommend apps like Fathom to deliver. It’s integration with Quickbooks and Xero allows for real-time report analyses that will be sure to wow your audience.

For a more in depth look at our opinions of these, and other amazing software, visit our YouTube page!

Conclusion – Stop using Excel for Bookkeeping

Excel is a fantastic tool, used daily by accountants all over the globe. However, much like the timeless screwdriver, it is useful in many situations. But only the best for a specific goal. Accounting on Excel is slow, inaccurate and requires additional software such as business intelligence tools to really get insight that can help with decision making. Quickbooks, Xero, and their ilk is the power drill that will add ease to your projects. We implore you to keep this in mind as you delve into business ownership. We wish you the best!

If you are going to setup a new accounting software like Quickbooks Online or Xero, please talk to us as we’ve done this hundreds of times.

If you’re looking for business bookkeeping services to help you get off excel and take on your bookkeeping, please contact us. We are local Canadian CPA accountants and bookkeepers and we serve businesses across Canada via cloud accounting.

Helina Patience, CPA, CMA
Author: Helina Patience, Founder, CPA, CMA, BA (Hons), BEd

Helina is a CPA, CMA with over fifteen years of experience in finance & HR within multinational companies, across many industries. Also the CEO of entreflow consulting group where I help small to medium-sized businesses get organized, grow, and crush their goals. I hold vast global experience after living and working in Australia, India, the UK and Ireland. Connect on LinkedIn.

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