Signs You've Outgrown Your Spreadsheet
Top 5 Signs You’ve Outgrown Your (Accounting) Spreadsheet
*Total Nerd Alert*
I actually have a favorite Microsoft Office program. I know that probably sounds really weird and dorky. Most people don't have a favorite computer program, and if they do, it's probably a game. (Warning: my favorite games are number games too. 🤓)
Anyway, my favorite program is Excel. When I was in corporate accounting in the oil and gas industry, and before that in Big Four public accounting, I spent all day in between spreadsheets.
Every single thing I did was in a spreadsheet. It was part of the support for every entry, every analysis, every report. After so much practice, I'm super comfortable with spreadsheets and love them. I know all sorts of formulas and hotkeys, but not everybody's like that. And you, my dear reader, may not be nearly as comfortable using a spreadsheet as me.
Many people ask me to look over their bookkeeping spreadsheets. I've seen good ones, really confusing and convoluted ones, and everything in between. A spreadsheet is a great start to managing your books, but it has its limitations.
For my own business, I would not do it all in a spreadsheet. A spreadsheet is good for filling in gaps. It's not good for doing the whole kit-and-caboodle once your business gets past the startup phase.
If Excel is not your favorite program or it’s not serving your business well, here are some signs to look out for. Consider these as omens that it's time to move on and try something else. If you need permission to stop using a spreadsheet, please keep reading along and see if any of these sound familiar.
Sign #1: You don’t know how to use a spreadsheet
What’s the first sign that a spreadsheet isn’t a good fit for you? You don't know how to use it.
If you're not familiar with using Excel or another spreadsheet program, it’s another skill to learn when you've already got a million other things to do as a business owner. There is a learning curve. There are formulas, all sorts of formatting, linking, hard coding, and sometimes pivot tables. It’s a lot. It may not be worth the investment of your time and energy.
Perhaps you’re thinking, “OK, well, I can't use the spreadsheet on the computer, but I can print it out and use my calculator app.”
True, you could. You could print it out and write in the numbers every day and every week. But your business must be micro-sized in order for that to work. The number of transactions can become overwhelming fast. Also, it’s incredibly hard to check your work and make sure you didn’t miss something. That translates into you not having confidence in your numbers.
If you're not familiar with using Excel or Google Sheets or Apple Numbers and your eyes glaze over when you try, then maybe it's time to move on. You didn’t outgrow your spreadsheet — it just never fit you to begin with.
If you don't like spreadsheets, if you're not using them, if they’re just too hard, that's OK. You don't have to use it. You have other options.
Sign #2: It takes hours to update your books
The next sign that it’s time for a change focuses on your time. It’s best to update your books every week. But, if it takes you hours to do so every week, that’s a red flag.
Now if your job is like mine and you’re an accountant, you could spend hours in spreadsheets every week. But you're not an accountant. So I know for a fact that it’s not the best use of your time. I’m 100% sure you have a million other things to do — because I do too!
Again, maybe the issue is that you don't know how to use Excel. That could eat up a lot of your time. Or it could be that you have a ton of transactions. There are many reasons why it could take a long time. But technology could make this so much faster and easier for you.
If you feel like it takes you too long to update your spreadsheet every week, then you’re right. It’s a clear sign that you've outgrown your spreadsheet.
On a related note, it could be taking you a long time because of how your spreadsheet is set up.
Sign #3: It’s too complicated
The next reason your spreadsheet may not be working out is it’s overly complicated. I see this often when people create their own spreadsheets from scratch. Or they get one from a biz buddy who didn't know how to organize the information.
Many clients have given me a complicated spreadsheet to review. They’re tired of feeling confused and ask me questions like, “what am I missing?” or “am I doing this wrong?” Often, I can’t tell them. It’s a real shame because I want to do more, but the spreadsheet is too convoluted.
One common problem is that they squeeze in too much detail. They'll add rows for each vendor or try to break out sales by every customer. They might create a bunch of tabs, one for every product or sale. This makes updating the spreadsheet difficult to do correctly and it can chew up a lot of time too.
Another issue is consistency. It’s absolutely essential to be consistent with your bookkeeping. Similar transactions need to be treated the same. That may sound easy, but in practice, it’s really tough.
For example, refunds. Do you break them out on a separate line or subtract them from the sales line? Either way works. You just need to be consistent. And if you have to update multiple spots then consistency will be an even greater challenge.
Finally, with an overly complicated spreadsheet, you can’t know how well your company's doing.
Your financials are like a scorecard for your business. If business is a sport, your financials are your win-loss record. If you don't know what’s making money or not, or even the overall “score,” then you're playing with a handicap.
Over 80% of businesses fail because of cash flow problems or failures to understand cash flow. As one of my biz heroes, legendary investor Warren Buffett, said, “Cash is to a business as oxygen is to an individual: never thought about when it’s present and the only thing in mind when it's absent.”
If you don't have a clear view of your profitability, you raise the risk of running out of cash. Complicated spreadsheets are part of the problem.
Sign #4: You find mistakes
The next warning sign is if you find mistakes in your own spreadsheets. You're back to not knowing the score, just like with an overly complex spreadsheet. You don't have a clear view of your profitability.
Finding mistakes in Excel is really difficult because you can't really check your work. There's no way to reconcile the information like you can in an accounting program. You may see that numbers aren’t adding up, don’t make sense, or should match something else but don’t. But fixing the error is like finding a needle in a haystack. Unless you want to go over every cell and transaction, you cannot be sure it’s accurate.
You need to be mindful of a number of potential problems in your spreadsheet. You could mis-key a number, use a plus sign instead of a minus sign, hide an important row or column, or break a formula. Per Dartmouth College, 94% of spreadsheets contain errors.
That means most of my spreadsheets contain errors too! And I know what I'm doing, have set up a lot of checks, and am constantly reviewing and verifying my data with what's in QuickBooks.
When you have a process and are updating your spreadsheet weekly, you shouldn’t find a ton of mistakes. If you're finding errors, especially big errors, then it could signify that something is very wrong.
There are a few other ways to build in checks, but it depends upon each person's financial accounts and the number of transactions. In the free spreadsheet I created, there's a check total between two tabs. It's extra work to update both of them, but that’s how you’d have to do it.
It can be laborious and take a long time.
If you're finding a lot of errors, then there are probably a few of these problems going on. It's time to try something else. I don't want you to make a bad decision, lose money, risk your company, not be able to pay yourself, or feel stressed as you’re scrounging to pay your bills.
Finding too many mistakes in your spreadsheet is worrisome and a sign that you’ve outgrown it.
Free DIY Bookkeeping Spreadsheet
Stay on top of your business finances—without overwhelm or fuss!
Sign #5: It’s a total energy suck
The last sign that you've outgrown your spreadsheet is if it absolutely drains you. Like if you hate doing it and it fills you with dread. A clue this could be happening is if you put it off for many weeks. It's just not worth it.
You've got plenty of other stuff you can focus on, especially as a business owner. When you're in business, it's all you. You have to dedicate a ton of energy, emotion, and effort. I wouldn't want to see something like a spreadsheet bring you down, or worse, spread to other areas of your company.
So if you just hate your spreadsheet, it's best to put it down. Use a program that can make it easier, like QuickBooks Online* or Wave. Or hire somebody else to do it.
This past June I was in the U.S. and I found a super cute mug. It’s from a very New England-y company called Life is Good.
I love the brand because it’s simple and uplifting. My new mug says, “love what you do and do what you love.” That's something that I live by every day.
I love being in spreadsheets. It's my thing. But if that's not you, then do what you love and leave the rest.
If your spreadsheet’s not working, find a better way
We've gone through five signs that you have outgrown your spreadsheets. Spreadsheets are great when you are starting out. They are a quick solution and could fit your needs for several months or even years. But, if you experience any of the five factors above, it’s time to reevaluate. If you’ve outgrown your spreadsheet, this CPA is giving you her blessing to let it go.
You have options: test out an app or hire someone to do it for you. You don't have to grit your teeth to get through it, or be so confused or anxious that you don’t update your books at all.
Right now, I'm creating a course on how to set up an accounting app. It will launch later this year, in time for you to have a system in place before the new year. If your spreadsheet no longer serves your business’ needs, stay tuned. I would love to help you get a better system in place.
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