How Using Spreadsheets For Accounting Is Dangerous For Your Business

Six Ways Using Spreadsheets for Accounting Puts Your Business at Risk

There are many small business owners and entrepreneurs out there who rely on spreadsheet programs for their accounting needs.

Are you one of them?

Since Excel and similar programs are included in almost all major productivity suites, it seems like a convenient solution. You might be using spreadsheets to meet your needs, but it’s time to ask if using them for accounting is really a savvy business move. Here are six significant ways that spreadsheet programs fall short when used for accounting (even for small businesses!):

1) Poor Organization

Simply put, spreadsheets are clumsy. You have to build your own file hierarchy to organize them, and it’s hard to share data between different sheets. It’s even tougher to get these spreadsheets to integrate with business data stored in other applications. Imagine that you want to send a sale offer to every customer who has spent more than $100 at your store in the last month. Spreadsheet programs are too clumsy to execute that task efficiently. They also make it difficult to share essential data with your accountant, bookkeeper or tax preparer.

2) Growth Restrictions

Imagine that you need to enter data into your accounting spreadsheet in more than one currency. You can already imagine the headache. After all, your spreadsheet just isn’t designed for that, and that’s the biggest problem. When it comes to meeting your organization’s growth needs, a spreadsheet program can’t do it. That’s where accounting software comes into play. It’s purpose designed for what it does. Spreadsheet programs are designed to meet a different kind of need, and that becomes painfully apparent when you try to use them as part of your growing business.

3) Questionable Accuracy

In order to make spreadsheets work their magic, you have to write formulas to handle equations. Some of these are pretty basic. Others, though, are incredibly tricky. If you get a formula wrong, your spreadsheet program can’t tell you. It will just do the calculation you told it to do, and it could be months before you realize you have a problem. That’s not the only accuracy woe either. Spreadsheet programs don’t have a sophisticated understanding of accounting data. They can’t catch entry errors that accounting programs identify automatically.

4) Storage & Security Troubles

Many business owners who use spreadsheets for accounting needs save the data directly to their computers. The problem with doing so is that data simply won’t be secure enough. If your computer dies and the data can’t be recovered, you’ll be without those essential records. If your computer is stolen or someone hacks into it, all of your business financial data could be exposed. It’s just too much of a security risk. Even if you store everything in the Cloud, your data is only as good as your last backup.

5) Restricted Vision

Creating meaningful financial reports is one of the biggest reasons that accurate accounting matters to small business owners and entrepreneurs. With spreadsheet programs, generating such reports is either very hard or impossible. That means you can’t get an accurate picture of what’s going on in your business today. Spreadsheets restrict your vision when it comes to handling other tasks such as inventory or client credit too. Making smart decisions as a business leader means having access to the best data. Spreadsheets just can’t provide that.

6) Lack of User Focus

The folks who designed spreadsheet programs are among the minority who find them intuitive and easy to use. Yes, you might know how to make basic manipulations to cells in Excel. Doing anything beyond the basics in terms of both formatting and formulating can be a lot more difficult. Even if you’re pretty savvy with spreadsheets, there will come a day when you need to translate a business calculation into a spreadsheet formula and won’t be able to figure it out on your own. You’ll spend hours searching for the answer online, and you might never find it.

That’s the crux of the problem with using spreadsheet programs to handle your business accounting needs. They steal time you could have used to focus on growing your enterprise.

On the other hand, web-based accounting software gives you the freedom to focus on what’s important instead. If you don’t want to continue risking your business, check out what Clever Accounting has to offer and try us free for 30 days. If your company is a startup, you can even find out if you qualify for a completely free package.

3 Reasons Why All Entrepreneurs Need Accounting

A great business-person needs accounting

It’s true that not many people who start a business do it because they are good with numbers. Many times “accounting” and “financial analysis” seem very annoying and overwhelming. They are just another task that need to be marked in an entrepreneur’s must-do checklist.

The fact is that in order to run a successful and profitable business, as an entrepreneur, you need to have some understanding of your business finances.

However, we konw that it can seem daunting that you have to pay attention to your tax structure, to the good management of your bookkeeping, to maximizing cashflow, to finding out what you can deduct from taxes, and so on.

How can you do all this?

To begin with, you can gain the knowledge yourself. There are some great eBooks and courses available on these matters. You can download our eBook and you’ll learn some important basics of accounting and how to reach a more professional understanding of it.

You can also work with a bookkeeper or accountant. Someone who can help you sail through all tax rules and organize your affairs responsibly. All entrepreneurs reach a point when they understand that finance is not just about paying taxes and reporting results once a year.

The reasons why entrepreneurs should learn some accounting

There are many reasons why entrepreneurs benefit from Accounting. Here are three key reasons according to Forbes:

1) Making predictions about the future

Visions in projects, startups and small businesses are great. However, visions need to have a solid pragmatic base, in order to turn from wishful thinking to palpable reality.

That’s why any entrepreneur has to stick to three basic projections: “future revenues, future operating costs, and assets needed to service future demand. ” Accounting and finance step in, as they offer the analytical tools for connecting expectations with what’s actually possible in the real world.

2) Remaining Responsable

Accounting helps entrepreneurs be more responsible when it comes to time, energy and money being invested. It helps them be more efficient in attracting customers and in selling their goods or services.

All entrepreneurs make commitments over time. Cost accounting, which measures costs and relates them to activities, is essential. Through this it becomes clearer for a business how profits and cash flow are impacted by operational and financial decisions.

3) Measuring and reassessing progress.

This way you can encourage profit, review your progress, make reports, and organize your business as is required in the long run.

You can track your progress by measuring profits and expenses to see whether you’ve turned out profitable & productive, and also to highlight problem areas. Through financial analysis you become more transparent and responsible in running your business.

Would you like to learn more about accounting?

There are more reasons why accounting benefits entrepreneurs. However, I hope that by now you appreciate the importance that Acounting plays in running a successful business.

To learn more about this subject download our eBook. It will help you grasp more basics of this essential business skill. What are ou waiting for?

How accounting controls your business

Accounting is a major part of your small business or even startup. While you might not realize this completely, it has a powerful impact on how profitable and successful your company is in the long run.

Why is accounting important?

Actually an accountant is more important than you might think. He/she is not just someone filling in papers and corresponding with you at tax time once a year. Their position in your business is not only for receiving your receipts and reports, and for keeping you pressed for time a few tedious weeks every spring.

An accountant keeps you focused on your business, both because you see how you’ve done in the previous year via your yearly tax return, and because you receive expert advice to set future goals and make a solid plan for your business.

I’m sure that by now you know that in every business you need to keep score and to maintain cash in your bank control. This is what basic accounting and cash flow control deal with. For a successful business, there needs to be a dedicated commitment and responsibility in using financial tools.

An accountant deals with the classic financial measures, such as the balance sheet (which tells you how much your business is worth), the profit and loss statement, and the cash flow statement (which help you understand the inflows and outflows of cash).  All these indicate the financial health of your business.

In order to evaluate the success of your competitors and your position in the business eco-system, you need this kind of information. You can read the annual reports of your competitors, to see whether they have financial success. You can also check the information provided for your company to determine whether you have the possibility to expand, to hire more staff, or whether it’s time to slow things down a bit.

How accounting impacts on your business

Accounting influences decisions to be taken in 4 major areas: finance, investments, operations and dividends.

Financing decisions

In any business, there is a need for finance. I’m going to talk about two financing sources: debt and equity. The former, by definition, needs to be repaid and has interest charge. The latter usually involves that the owner invests their money, or others invest money in the business in exchange for shares. This doesn’t have to be repaid, but investors will get a part of the future profits of the business. Although debt (a loan) will have to be paid + interest, it is usually the right option at the very beginning of the business. Equity is offered when the business has already started showing a promise. As a result, trading equity for cash at the latter stage is more favourable for the business and shareholders.

Investing decisions

After finance, comes investment. Accounting will also determine the budget you have for this. You should invest in items and assets that are in the benefit of the company, also you should invest sensibly and put money into non-current assets, which will offer benefits in the long run.

Operating decisions

These impact directly on your business and how it is run. You need to think of the price charged for your goods, of the distribution model and the marketing strategies and their costs. You should aim for profit, so that your operating decisions should result in income exceeding the expenses for the year.

Dividend decisions

It’s essential to observe cash inflows and outflows, and not only profit. Also, the final decisions should concern how much cash there is to return to shareholders by way of a dividend. The funds not to be returned as dividend are kept within the business entity, thus becoming a source for future investments.

Would you like to optimize the accounting of your business?

These are only a few details about how this process controls and influences your business. There are many more aspects and maybe you’d like to share a few with the community on our blog.

So, why do you think accounting is so important for a small business? If you still haven’t figured out this aspect of your business, download our eBook, and it will help you get in control of your business.

9 Advantages of Computerized Accounting

 

Accounting has been done manually till the 1980s, when the advent of fast computers and easy-to-use, accurate and reliable software started.

An accounting system is a collection of processes, procedures and controls designed to collect, record, classify and summarize financial data for interpretation and management decision-making.

Computerized Accounting involves making use of computers and accounting software to record, store and analyze financial data. A computerized accounting system brings with it many advantages that are unavailable to analog accounting systems.

This article does not tackle the use of spreadsheets that are often used instead of proper accounting software to process financial data. It is common knowledge that spreadsheets do not provide a scalable solution for accounting purposes and therefore are a dangerous solution to invest in.

 

Here are the advantages of using computerized accounting software

· Automation: Since all the calculations are handled by the software, computerized accounting eliminates many of the mundane and time-consuming processes associated with manual accounting. For example, once issued, invoices are processed automatically making accounting less time-consuming.

· Accuracy: This accounting system is designed to be accurate to the minutest detail. Once the data is entered into the system, all the calculations, including additions and subtractions, are done automatically by software.

· Data Access: Using accounting software it becomes much easier for different individuals to access accounting data outside of the office, securely. This is particularly true if an online accounting solution is being used.

· Reliability: Because the calculations are so accurate, the financial statements prepared by computers are highly reliable.

· Scalable: When your company grows, the amount of accounting necessary not only increases but becomes more complex. With computerized accounting, everything is kept straightforward because sifting through data using software is easier than sifting through a bunch of papers.

· Speed: Using accounting software, the entire process of preparing accounts becomes faster. Furthermore, statements and reports can be generated instantly at the click of a button. Managers do not have to wait for hours, even days, to lay their hands on an important report.

· Security: The latest data can be saved and stored in offsite locations so it is safe from natural and man-made disasters like earthquakes, fires, floods, arson and terrorist attacks. In case of a disasters, the system can be quickly restored on other computers. This level of precaution is taken by Clever Accounting.

· Cost-effective: Since using computerized accounting is more efficient than paper-based accounting, than naturally, work will be done faster and time will be saved. When one considers that Clever Accounting, one of the latest online accounting solutions, starts at a low monthly subscription (check out pricing here), then computerized accounting really becomes a no-brainer.

· Visuals: Viewing your accounts using a computer allows you to take advantage of the option to view your data in different formats. You can view data in tables and using different types of charts.

Computerized Accounting represents a technological advancement in the field of business accounting. Do you use computerized accounting in your business? If yes, how important are the above advantages for the continued survival of your business?

 

Click here to start a free 30 day trial of Clever Accounting, an online computerized accounting software.

5 reasons why you should be aware of your business finances

According to this study by the University of Tenneessee, one of the biggest reasons why many new businesses fail is because of a lack of proper financial management.

It is common for small business owners not to have basic knowledge of Accounting. Although this is understandable, it doesn’t mean that accounting can be ignored. It can’t.

Does this mean that every small business owner has to be an Accounting expert? Of course not. However, having a solid knowledge of the fundamentals in Accounting will help you manage your business finances better and ultimately reap better results.

In this Clever Accounting blog we’ll be regularly posting short blog posts with important tips for small business owners to help you improve your business management. The following are 5 reasons why business owners should remain aware of the their business accounts:

Know how your business is doing

The success of most businesses is measured through monetary results. If the numbers are nice, then the business is doing something right (not necessarily everything). However, if the numbers are in the red, then something is probably wrong. Checking your accounts regularly lets you quickly notice (positive & negative) trends in your organization.

Take care of your cashflow

Cashflow forecast/actual is a document that forecasts how much money is spent and the amount of expected sales and other income one expects over the coming months. Usually a cashflow forecast is done for a year. As time goes by, the cashflow document must be visited and actual income and expenditure registered and compared to the forecast. This exercise helps the management on decision taking, adjusting the operation of the business in line with available resources.

Avoid forgotten expenses and tax fines

Regularly looking at the income and expenses of your business will help you better anticipate future outflows and inflows of money.

When you haven’t checked how you’re doing for a few months you might realize that you’re paying for stuff that you don’t need. For example, you might have signed up for a monthly Dropbox subscription and you’re not using it.

Keep up with who owes you money

People don’t always pay on time. Business owners are often so busy dealing with everyday issues that they forget to do less desirable tasks like running after clients to pay up. Without realising, you might even have clients who are threatening your business. Late paying clients can result in serious cash-flow problems that can affect your business development and survival.

Being able to generate a report listing your creditors in an instant is something small business owners should be able to do. Here’s a quick video of how to do this in Clever Accounting.

Practice budgeting

Budgeting is one part of business planning, and it is a very enlightening exercise. Although we cannot know the future for certain, we can make informed predictions on which we can base our business decisions. Without budgeting, the decisions we take cannot be based on how the business is currently performing against the expected financial performance of the business.

For example, a sales rep phones you up and offers you a special offer full page advert running on the local business magazine. Only €350, a real bargain! However, without a budget, you cannot take into consideration how your company is performing (financially) against the future projections/goals that you had decided on. Would taking the offer break your future stability? Budgeting goes hand in hand with forecasting and together you will be able to plan for your business in a more informed way.

There is a lot more that can be said about good financial management. Do you have any other tips that you could share from your experience?

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