Now, before we go into a blinding rage against Excel for accounting, we will admit, it does have some great purposes in the workplace. But if you are still using Excel for accounting and bookkeeping, you need to be aware of some of the major pitfalls.
When it comes to cloud based accounting software, you don’t have to worry about backing up your files, or ensuring “auto-save” is turned on, for that matter. When the power goes out there are no fears of unsaved worked, nor will you have to hunt down your I.T. person hoping there’s some way to retrieve that two hours of work you didn’t save.
There are also the possibilities of a hard drive crash with your local pc. It happens, and when it does we’re sure Murphy’s Law will be at play, crashing at the most inopportune time.
When you use Excel for accounting your books can get cooked – literally!
When a data file is too large, it can make the Excel program run very slowly, especially if all the data is in one file. Trying to break the data down into smaller files can lead to some of it being lost or misplaced. Excel is not user-friendly and the application rounds off very large numbers using imprecise calculations, which compromises accuracy.
Excel is also a standalone application, not fully integrated with other business systems; it does not provide sufficient control because sales managers don’t have easy and consistent visibility of the quotes sent by their reps, or the history of those quotes.
Each time employees make changes manually in Excel, there is a risk of introducing errors and compromising accuracy. These mistakes are not only hard to locate further along the process but can also negatively affect the bottom line.
Fraudulent manipulations in company Excel files have already resulted in some million pound losses. The main underlying reason behind this spreadsheet vulnerability is the inherent lack of controls (see above) which makes it so easy to alter formulas, values, or dependencies without being detected.
More mundane but equally damaging is Excel’s extreme susceptibility to trivial human errors. Missed negative signs and misaligned rows may sound harmless but when they damage investor confidence or cause a considerable loss of opportunity amounting to millions of pounds these are make or break errors. On average, a spreadsheet will contain 1 error for every 20 cells that have data.
Spreadsheets are not designed for testing. It’s not uncommon to have interrelated spreadsheet data scattered across different folders, workstations, offices, or even geographical locations.
Even if it is possible to pinpoint the locations of every related file, tracing the logic of formulas from one related cell to another can be time consuming. Similar problems will be encountered when troubleshooting any questionable data.
Many regulations impact on spreadsheet systems. Over the last two decades, there has been a growth in regulations that directly affect spreadsheet-based data, with associated compliance deadlines. Every spreadsheet has to stand up to official scrutiny. Does yours?
Spreadsheets are often created by individuals who have very little IT expertise. Eventually spreadsheet files become highly personalised user developed applications. So, when it’s time for a new person to take over as part of a business or personnel change, the newcomer may have to start again from scratch.
If you look at the list above, it would seem that the only task that requires ongoing maintenance is paying your taxes. But that couldn’t be further from the truth.
In order to conform to be informed about the health of your business, you’ll need to have a system for tracking outgoing invoices, incoming customer payments, payroll costs, business expenses, and financial changes such as funding infusions and large purchases. The tracking of incoming and outgoing flows of cash are the lifeline of your business.
Fortunately, there are multiple options available to businesses. You can evaluate accounting software and purchase access with the plan to manage it all on your own. You can hire an accountant and have them manage your books using the software you purchased (or one they recommend), with high-level input from you. Or you can even outsource the process entirely to an accounting platform that provides software plus accounting support.
The choice depends on how much of your own internal resources you want to allocate to accounting needs (versus using outside resources).
For more advice on starting and growing your business, check out the Alya blog. And click below to download a printable version of this checklist.
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Corporate Tax Registration Deadline Alert If your business license was issued in August or September (any year), make sure to register for Corporate Tax by
Is it mandatory to register for corporate tax in UAE? All taxable persons are required to register for UAE Corporate Tax and obtain a Corporate Tax
Scope of UAE Corporate Tax: What You Need to Know The upcoming UAE Corporate Tax (CT) will impact a broad spectrum of businesses and individuals.
Truly, let us know what service you are looking for and hence we can get back to you with more details.
Definitely, Alya Auditors is the one partner you need to ensure your business is built on accurate accounting books certainly, to spearhead greater growth and wider market reach.
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