As a business owner, what do you believe is the best way to maintain your business financial records? Microsoft Excel or accounting software? Are you aware of the pros and cons of each? Let’s find out the answers to these questions and come up with a favorable decision for your business.
Microsoft Excel is the by default bookkeeping choice for majority of small businesses in Pakistan. Small business owners especially the ones who have just started up find Excel spreadsheets easily accessible and low cost with thousands of templates and tutorials available online. However, as their businesses develop, they quickly get to see that they cannot cope with the manual labor needed to keep up their financial records on Excel. And then they have to come across a business decision – whether to keep spending time and efforts in tackling Microsoft Excel and the insecurities associated with it or transferring all their business accounting records to an accounting software.
What is Microsoft Excel?
MS Excel is a popular spreadsheet program used by many small businesses to maintain their ledgers. It gives its users the ease to calculate, form, and estimate quantitative figures, providing the organization with information required to make noteworthy choices that can have a significant impact on the business.
Benefits of Using MS Excel:
- Excel is inexpensive – it only costs Rs.1200 per month.
- It is easy to use; majority of users are familiar with its functions.
- It’s easily accessible as the templates are widely available online – the simple ones can be downloaded free of cost while the advanced ones can be downloaded by paying a nominal price.
- The formulas and equations can be created without any difficulty.
- It allows the users to generate unlimited graphs and reports.
- The users can read and understand data and spreadsheets using MS Excel from other divisions, customers and vendors.
Limitations of Using MS Excel:
- MS Excel is time consuming. It takes a lot of time to create invoices, reports, sales and purchase statements, bank reconciliation and feeds, payroll, contacts, graphs and billings etc.
- The data entry is prone to errors.
- Easy adaptation of records is not available to client facing procedures such as sending emails.
- It is primarily good for numbers calculation.
- The valuable data of the user can be corrupted over unintended deletion or changes.
- Not reliable for the preparation of taxes or surviving a tax audit.
- There are many security concerns. The protected workbook can be opened, edited, or removed by other users in the company.
What is an Accounting Software?
An accounting software is a computerized system that keeps track of your incomes, expenses and other business finances crucial for making substantial business choices. It lets business owners get hold of their business funds and utilize them to their benefit. An accounting software is not just a more streamlined progression but it also gives its users the ease of accessing real-time data which helps them estimate and plan the future goals of their business.
Benefits of Using Accounting Software:
- It does a wide range of bookkeeping and accounting tasks and helps in performing financial transactions.
- Accounting software is extremely user-friendly.
- Majority of accounting software are also available online. This means that a business owner can always remain connected to his business ledgers through internet using his smartphone, tablet or laptop.
- An accounting software is quick. It automatically enters data and stores and evaluates it for the user.
- It generates daily sales and purchase reports for the ease of its user.
- Best for tasks that are time consuming; for instance bank reconciliation, bill payments, invoicing, financial reporting and payrolls
- The chances of error are very less plus the data is very much secured.
- Accounting software helps in reducing overheads as less physical space is needed since the usage of physical data becomes antiquated which saves expenses with respect to rent.
- It also benefits the user by retrieving years old ledgers whenever required, which is accommodating for both external and internal audits.
- It offers localized taxation features for local businesses.
Limitations of Accounting Software:
- Some of the accounting software are designed for specific industries and are not suitable for every other business.
- A customized accounting software is more helpful but it is high in cost.
- Online accounting software can only be accessed through the internet making the user highly dependent on the internet connection.
Microsoft Excel Vs. Accounting Software
So, now when you have gone through the pros and cons of both MS Excel and accounting software, it’s time to get on the hot seat to take the decision.
- Excel is an all-rounder. You can do many tasks other than accounting on it while an accounting software is only meant for accounting purposes.
- If you want secured and error free bookkeeping then accounting software is definitely what you’re looking for but if you just want to basically calculate your things and keep a simple record, MS Excel will suit you.
- Go with an accounting software if you’re particularly concerned about features like sales and purchase, invoicing, payroll, billings etc. The accessibility of these features on the cloud will make your life easier.
- Unlike MS Excel, an accounting software helps you plan your business tasks by generating its own reports.
Now, to summarize Microsoft Excel is great for carrying out simple accounting tasks like storing less amount of data and evaluating it. However, by the time your business expands and you have a lot more financial records to track, an accounting software will give you better output and profitability. Thus, we hope that we have made it much simpler for you to decide what to choose for your accounting needs. At times a simpler or cheaper option may become the opposite in due course. LedgerMax is an accounting software that is highly recommended for small business owners in Pakistan given that it is especially designed to cater the accounting needs of Pakistani business.
Choose wisely and best of luck for your business!