Financial analysis is essential for all businesses to make quick business decisions and determine the future course of action using relevant and useful data about the strengths and weaknesses. Today, the accounting process has been made convenient, even for people not well-versed in accounting, by the use of accounting software and computer programs. One of the most common programs being used for accounting is the Excel spreadsheet. Many small- and mid-size businesses have been using Excel spreadsheets for calculation of their accounting books. But a lot of in-house accountants in Edmonton don’t know how spreadsheets have limitations that keep them from accurate accounting.
Consider this before praising spreadsheets; Accounting has been here since the beginning of early civilizations. The earliest accounting process or calculation dates back to ancient Mesopotamia (c. 3100 BC). Excel, on the other hand, was released for use on September 30, 1985. Do you feel the gap yet? When Excel came out, it wasn’t even specified that the program was built for proper accounting rules and calculations. Business mathematics is a twisted knot and requires skills of accountants in Edmonton to prepare accurate profit and loss statements. There are issues with the Excel spreadsheets that affect the accounting procedure of your firm and may result in erroneous information.
1) Poor Organization
Legitimate organization of transactional data is the first important step of accounting. If the data you have is not organized in proper categories and books, it will get obscure when you are actually trying to put the data to use for decision making. In this matter, spreadsheets are ponderous. For conveying data on the spreadsheet, you have to deliberately make your own grouping of files and information to organize them separately. In that case, accountants in Edmonton would still be better with pen paper where they can have different books for different categories of transactional data. In spreadsheets, sharing of data among different sheets is difficult. So if you’re taking a transaction from the cash book to use it in the profit and loss statement of your firm, you’ll have to re-enter the whole data manually in the other sheet. Spreadsheets make it challenging to transfer information on them from another application storing business data. Also, not all the details can be fit into the spreadsheet, so the data is hard to share with your tax preparer or your accountant for better results.
2) Growth Restrictions
Spreadsheets can be feasible to work on when the business is just starting up, and the calculations on the data are not too complicated or acute to regulations. Simple arithmetic calculations can be easy, but when the company grows, the calculations become complex as business mathematics is different than ordinary arithmetic used in calculating profit on a range of products. Suppose you have to engage in transactional data that has to be calculated between two different currencies. This is going to be troubling for you because the spreadsheet won’t do anything for you in this case. Spreadsheets were not made to be managing complex business data and calculations that require accountants in Edmonton on a register with excellent bookkeeping strategies. Accounting standards and cash flow are not understood by spreadsheet programs, and you will face problems when you try to add a business equation to the mix.
3) Poor Accuracy
Spreadsheets are old codes and require human help to make them work on the data that you provide. On spreadsheets, when you want the sheet to convert raw form data into calculated outputs automatically, you are required to write formulas for the spreadsheet to understand which way the calculation proceeds. It might be easy to come up with formulas for the most basic of calculations, but when your business grows and the equations of accounting become perplexing, it is difficult to come up with formulas that can represent the actual business equation to the spreadsheet. Even if you write a formula, it is highly possible that the formula is taken as something else at some points of the data and the whole calculation has errors that might not be found out until it's too late to rectify them. Not only do the errors make it unsuitable, but spreadsheets also have no idea about the accounting data, unlike human accountants who know about the accounting standards and will point out any errors you have committed in the balance sheet.
4) Storage and Security Concerns
When working on spreadsheets with your accounting data, all the data that you have acquired until now has to be saved on the computer itself and requires saving the data before you shut down the system. Since all the data is on the computer and is being conveyed to the spreadsheet in question, it has to be stored carefully so that no data is lost in the net of different programs. So if the computer suddenly shuts down while the sheet was still under use, all the data that you had accumulated will be lost, and you will have lost vital information to be analyzed for your firm. When you save data on electronic devices, there is always a chance that the data might get stolen if the device is stolen from the premises. Since hacking and malware attacks the prevalent, security concerns are heightened for crucial data about your firm that you wouldn’t want some people to have a look at. Even if you’re saving data on the cloud instead of your hard drive, it is only relevant to the last backup that you have made.