Do you want to save money by using Excel for basic business accounting?

Excel is easily available, widely used and can do any number of tasks. A lot of small businesses start off using Excel for accounting, but it can only take you so far. Excel can help you keep track of business, but not if you have a complicated financial situation. 

Are you a sole proprietor with an unincorporated business not yet ready for online accounting software? Do you want to use Excel spreadsheets to track your finances so you don’t need to pay for additional software? Let’s explore whether it is really worth the money you save.

Excel for Basic Bookkeeping and Accounting?

Excel is an excellent spreadsheet program and if you already have it on your computer, you have what you need to start your own basic bookkeeping. There are many free Excel bookkeeping templates out there that can be used by any small business. Many new entrepreneurs take advantage of Excel until they are able to afford proper bookkeeping and accounting software.

A bookkeeping spreadsheet should include Income (business only), Cost of Goods Sold, and Expenses. Some small business owners feel comfortable using an accounting template that includes sales tax features and maybe the tracking of two bank accounts and one credit card. 

It’s important to keep in mind that setting up a good spreadsheet takes time, even if you started with a template. When you use Excel for accounting, you have to enter all of your data manually which increases the risk of data entry errors. A simple typo in a formula can cause you major problems. A University of Hawaii study found that 88% of spreadsheets contain errors. 

Excel isn’t a long-term solution, and it’s really only a “free option” if you have lots of time. It doesn’t integrate with other small business applications that can help you run your business. Once you’ve outgrown Excel, you’ll want to try a full accounting software for a more powerful solution. There are other, better, free options. To learn more about the best free software option, read our article Wave Accounting, Can I Do It Myself?

Why Accounting Software Is Better Than Excel

Using Excel properly has a learning curve, similar to a programming language. Unfortunately, many Excel users overestimate their level of expertise. Accounting software comes with an easy-to-use dashboard that you don’t have to set up yourself. Online accounting dashboards monitor your cash flow with simple charts and graphs. There are reports you can customise to track which monthly trends are important for your business. You can choose which bank accounts, credit card accounts or PayPal accounts you want to monitor. Your dashboard will always give you an up-to-date balances and reconciliations across all of your accounts.

To learn about our preferred cloud-based accounting software, read the article Comparing Xero vs QuickBooks Online in 2019.  

Do More in Less Time, Accurately?

Setting up an Excel spreadsheet that meets all of your business’s bookkeeping and accounting needs necessitates a lot of thought and planning. It takes quite a bit of time to set up an invoice tracker and expense reports. And because there’s no audit trail with Excel, those spreadsheets are vulnerable to fraud because it’s easy to change information and hard to keep track of who is making changes. That isn’t the case with small business cloud accounting software. 

Technological advances are very good for your growing business. When you use cloud-based software, you can take advantage of apps that sync with your financial data. Bank statement lines are fed right into the software, so data is always accurate. A proper audit trail means that data cannot be compromised. 

No matter which device you use, no matter where you are in the world, when you’re looking at your financial data within accounting software, you will always have the most recent data in front of you.  With an Excel spreadsheet, you would always need to double-check to make sure you have the most recent version of the spreadsheet open. 


Stay connected to your business’s financial data. When your software is all linked through the cloud, the payments you make and receive are automatically recorded to a digital ledger. The software program makes calculations for you, which gives you an accurate picture of your income and spending that’s updated every time there’s a deposit or withdrawal. The software can integrate seamlessly with a whole system of add-ons, including apps that do payroll and inventory management

There are some really great apps (our favourite is Hubdoc) that allow you to streamline document collection, as they quickly and easily upload bills and receipts through your smartphone. When you have a paper receipt, just take a quick picture which goes straight into your accounting software. By integrating directly into online accounting software, Hubdoc turns our clients’ receipts, bills, and invoices into proper transactions, which enables them to complete a bank reconciliation in just a couple of clicks.


Unfortunately, an Excel spreadsheet that makes sense to you might not have all of the information your accountants need to do their job. That’s why it makes sense to use a proper accounting software and ideally, a detail oriented bookkeeper. Professional Bookkeepers collect and organize your financial documents, so that you can do what you’re in business to do. 

If you’re a small business owner, professional bookkeeping services may seem like an indulgence, a perk that can be added once cash is flowing or the business has reached a certain size. In actuality, a bookkeeper is the first pro your business should partner with. It takes a specialist to do the job well. Bookkeeping is the gathering, organizing, and filing all of the data related to your company’s finances. 

Bookkeeper’s compile:

  • Invoices
  • Receipts
  • Bill statements
  • Payroll records
  • Sales Tax
  • Bank and credit card statements

A good bookkeeper will ensure you have data and numbers you need to help your accountant understand your business’ financial health and make predictions about your business’ future. If you’re a creative entrepreneur, click over to Why Creative Businesses Should Hire a Bookkeeper.

Ultimately, using excel for accounting is not worth it, unless you are a small unincorporated business just starting out. Then it makes sense to use Excel as long as your spreadsheet is setup properly. Otherwise, with today’s technology, cloud accounting software is the better option for most small businesses because it lets you keep all of your financial information in the same place, knowing that the information is current at all times. If you really want your business to grow and succeed, without any restrictions, try real accounting software.