Why use accounting software like Quickbooks instead of Excel spreadsheets?

Question

Some friends and I are starting a small landscaping cooperative, and are thinking about how we will manage accounting. Places we've worked in the past have used Excel spreadsheets to manage all of their finances.

However, a lot of the stuff I've been reading online has been suggesting that for all but the most simple businesses, it is better to use accounting software such as Quickbooks or Gnucash instead of spreadsheets.

Some of the reasons I've seen for this are that:

• Working with Excel formulas is complex and prone to error. Accounting software handles all the calculations for you, and does it properly.
• Excel spreadsheets are susceptible to fraud because it’s easy to change information and hard to keep track of who’s making the changes, whereas accounting software maintains an audit trail.
• Spreadsheet errors are easier to make (copy/paste errors, moving content out of cells that other formulas base their calculations on, etc.), and are much harder to track down.
• Each income stream requires a different spreadsheet to track our earnings ... this means that as we start offering more services, the number of spreadsheets will increase, and this can become confusing.

Would you all say that these are fair claims? Are there any other reasons you would prefer accounting software over Excel (or vice versa)?

Basically, why would you recommend that a new business do all of their accounting with specialized software instead of just managing it all in spreadsheets?

Thanks!

Answer 1

I would say that all of the reasons you list in your question are valid, and I would add the following...

You are in the landscaping business, not the accounting business. If you manage everything in spreadsheets, at least one of you has to become the bookkeeper and leave the landscaping to the others. Spreadsheets are "agnostic" in how you use them, so you have to turn them into an accounting system, which means you're now not only more of a bookkeeper, but you're also more of a developer, too, and even less of a landscaper. Accounting software is already developed by developers who understand accounting. Using it requires you to only perform the data entry tasks, and then you can focus on the landscaping, customer service, sales and marketing, etc., things that actually contribute to your business.

It is still good for you to understand basic accounting principles. Specialized accounting software will guide you through the process of learning and help you avoid making many of the costly mistakes you might have made in that learning process.

Answer 2

I think your reasons are good. Fundamentally accounting software is built to ensure you record your accounting data effectively with minimal mistakes and good auditing. But you still need to use the tool properly to get the benefit.

One other advantage is that many accountants are familiar with, say QuickBooks, and can do your accounts more effectively if you use their preferred tool.

Answer 3

I would add to your reasons:

• QuickBooks makes it easy to send statements or invoices to customers that request them
• QuickBooks has a number of built in reports that may give you insight into how your business is doing (revenue month by month through the year, putting customers into categories that reflect how you landed them and then comparing the categories and so on.) You would have to implement that yourself in the spreadsheet and would probably not get around to doing it
• In my jurisdiction, QuickBooks makes it super easy (few clicks) to do the tax paperwork for myself and my staff rather than having to do it by hand and code up a spreadsheet. I can also give the books to my accountant with a few clicks as well.

Would you mow an entire lawn with a string trimmer just because you can, or would you buy a lawnmower? Use the right tool for the job.

Answer 4

Since this is a cooperative I'm guessing your partners may want to be able to view the books so another key point you may want to consider is collaboration.

• Who is going to keep the "master" .xls file?
• Where do they go to get the latest file and how do you ensure that you're not making conflicting or duplicated entries or possibly losing data when you merge?
• Who is responsible for taking the records across town to the accountant on a USB thumb drive at tax time?

QuickBooks desktop has all of these same issues because it is meant to be used on a single desktop.

We're in an age of mobile devices, and especially in a business like landscaping it would be nice if certain aspects of record keeping could be done at the point and time where they are incurred.

• Filling up the truck and gas cans for the mowers? Capture an image of the receipt and track the expense right there at the gas station on your smart phone
• Just finished a big job why, not ring the doorbell to get approval from the owner and email an invoice (or take payment on their credit card) right there with your tablet?
• Monthly statement just came from the bank and you're closing the books for the month why not do your reconciliation on a laptop in a browser from the coffee shop, office or couch?

I'd argue you want a Software as a Service (SaaS) accounting package as opposed to "accounting software" which might come on a CD in the form of QuickBooks, Sage and others. Additionally, most of these will also have guides to help make sure you are properly entering your records. Most of these SaaS products also have customer success teams to help you along should you need assistance. Depending on the level of your subscription you may get more sophisticated handling of taxes, customized invoices or integrated payroll.

Your goal is to keep accurate records so you can better run your business and maintain obligations like filing taxes. You're not keeping the records just to have them. Keep them in a place where they will work for you and provide the insights and functionality that will help your business grow and become successful. Accounting software will always win in this scenario over a spreadsheet.

FULL DISCLAIMER: I work for Kashoo, a simple cloud accounting product designed for small businesses. But the points I mention above are true for Xero, QuickBooks Online and Wave as well as Kashoo. And if you really want expertise to go with the actual software consider service providers with a platform like: Indinero, Bench, easyrecordbooks or Liberty Accounting.

Answer 5

Why use spreadsheets rather than writing your forms and formulas directly in a programming lanuage?

Because you've got better things to do than reinvent the wheel, right?

Same answer.

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clarification, since the point apparently wasn't clear:

Using a spreadsheet means you're writing and organizing and maintaining the formats and formulas yourself. Essentially, you are writing your own accounting program, using the spreadsheet program as your programming language. Nothing wrong with that, it just means you're doing work to produce something that you could have purchased instead. It's up to you to decide how the value of your time doing that work trades off against the cost of the commercial product.

For many people, especially as the bookkeeping becomes more complex, that isn't a good investment of their time. The otherwise billable time it would take them to maintain the spreadsheet is worth more than the cost of buying an off-the-shelf product, and the product offers features that they wouldn't get around to adding to their own solution. Add to that the question of whether people find creating and tweaking spreadsheets rewarding or annoying.

The right tool is always the one that lets you focus on what you actually care about, unless the cost is too high to justify it.Most folks care about getting the accounting task done a least cost/least efprt. Buying a solution is least effort; if the real cost including time/effort is also lower, that's the direction they're going to go.

I maintained my own accounts, and did my taxes, in spreadsheets for quite some time. These days the time to do so, multiplied by what my time is worth, would exceed the cost of buying tools, and the commercial tools are more pleasant to use, less prone to accidents, and offer featured that I don't need but appreciate. I still use a stylesheet for one small calculation (rebalancing my invedtments) but thst's because I havean odd corner case the built-in tool doesn't handle well...not that it makes any practival difference, but being slightly off annoyed me.

Your milage, obviously, will vary. Use the tool that suits your needs; others will do likewise.

Answer 6

Here are the few points:

1. Excel is limited in features, but QuickBooks not.
2. Excel is time-consuming, requires manual data entry.
3. Manual data entry leads to mistakes, so there are chances of errors.
4. Excel doesn't provide you the real time analysis and customized reports so that you can take better business decisions.
5. Your accountant may charge you more because it may be time-consuming to understand the sheets or records you provide.

Hope that helps,