Thanks to its presence on just about every business-class computer, Microsoft Excel has become the de facto tool for handling basic small-business accounting tasks. But while spreadsheets can be useful for a startup, they inevitably become cumbersome — and potentially harmful — when managing financial data for a growing business. When you have more than a handful of clients and transactions, it’s time to move on to accounting software. Here’s how to make the transition.
Why You Should Switch to Accounting Software
As your customers, vendors, and transactions increase, managing them in Excel becomes exponentially more complicated. Reporting — which requires you to manually enter specific formulas to get the information you want — becomes particularly time-consuming when working with large amounts of data. Also, spreadsheets are only as accurate as the person entering the information, and studies show the error rate increases with the complexity of the spreadsheet. Just ask JPMorgan about the devastating effect an Excel blunder can have on the integrity of your data.
Unlike spreadsheets, accounting software is designed to scale with your business. Because these programs can pull real-time data from your financial institution, you’ll save time on data entry and have more accurate records. Out-of-the-box reports give you deep insights in just a few clicks. Accounting software also makes it easier to manage multiple users, allowing you to restrict access to certain data and providing an audit trail so you can see details about each transaction and easily track and rectify any errors. Other perks include “anytime, anywhere” access to your financial information and easy syncing with other business applications. Try doing all that with a spreadsheet.
Preparing Your Data
Most accounting programs can readily import Excel files. However, they don’t automatically know which information goes where, so you’ll have to reformat some of your data. Whatever accounting software you choose will have requirements for the way information is ordered — for example, if your customer data spreadsheet places the company’s email before its phone number and your accounting program wants it after, you’ll have to reorder that data in your Excel file before you import it. Your program will probably also have requirements for column headings, formatting of dates and currency, character limits, and so on, and they’ll likely differ for each type of list you’re importing (Customer, Vendor, Account, etc.). Check the instructions for your particular software and edit your spreadsheet data accordingly.
This is also the time to clean up any data-entry errors if you haven’t already.
The Best Time of Year to Make the Switch
The obvious time to switch over from an Excel-based system to your new accounting software is at the end of your business’ fiscal year. That makes for the smoothest transition as all your accounts are reconciled, year-end reports are done, and final adjustments have been made. But the truth is, you can change systems any time of year you like. For the smoothest transition, pick a time that’s not exceptionally busy for your industry and that’s at the end of a month, quarter, or other clear-cut accounting period.
Handling the Transition Period
Even if you’ve done the necessary prep work and chosen the least disruptive “go live” date, you’re bound to hit some speed bumps during the transition from spreadsheets to accounting software. Give yourself time to acclimate to the new workflow and resist the urge to attribute every difficulty to the software. That said, don’t hesitate to use your program’s support options when necessary. And no matter what, run your old and new accounting systems in parallel for a short period until you’re sure the new system is running smoothly.
Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa works with small business owners and entrepreneurs to assist them with financial management and creating organized systems and procedures. She specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.
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