This year has been crazy.  We’ve gone from being relatively care-free to an agonized mess.

Our annual accounting with the government should have ended a month ago- but a great percentage of us won’t finish with this task for another two months.  Which is part of the subject matter I’ll be discussing today.

We routinely receive calls, eMails, and notices from solopreneurs and entrepreneurs looking for talented financial advisors.  We also receive about the same number from those folks desperate for anyone to hand them a life line.

In more than ½ those cases- those with revenue between $ 50K and $ 500K, the common thread is “I(We)  currently don’t use any accounting software”.   Yup.  These folks have nary a clue as to how well their business is operating.

Oh, sure, they use the “I have money in the till” approach to business success.  But, that really tells them nothing about their ability to expand, to handle a downturn, or even to pay their taxes.  (Trust me- in at least 25% of the cases, part of our job is to make an arrangement with the IRS for them to pay their taxes.)

Some even have the ‘chutzpa’ to tell us that they use Excel and that is perfect for their needs.  Sure it is.  Except- we all know that most spreadsheets contain errors that we don’t catch.  Consider the research (Ray Panko, Hawaii) that demonstrates that some 88% of all those spreadsheets (even the ones you downloaded that claim they help you control your finances) have errors.  In at least 1% of the formula cells.  Which means in large spreadsheets, there are dozens and dozens of undetected errors.

Don’t get me wrong- we use Excel spreadsheets, too.  But, we routinely test them to make sure they are free of errors. (And, no, we don’t share our spreadsheets with anyone.  They are our “stock in trade”, our “competitive advantage”.)

But, I have had the honor of working with Excel for nearly 30 years.  (I used SuperCalc for 10 years before Microsoft convinced me to become one of the testers of their software. I’m still nostalgic for SuperCalc!) Back when Office 95 was the goal- not the actual product. And, even I don’t claim to know all the capabilities of the software.  But, because Excel has such wide use- and can be used to add columns of numbers, too many solopreneurs think they can perform all sorts of financial manipulations via this tool.  Except Excel is pretty close to a programming language.  (Just try to effect some pivot sheets!)

I hinted above that setting up a spreadsheet takes time, planning, and testing.  Even a simple expense report or invoice often means that an improper result obtains.  Because you need to define regions (groups of cells) so that the totals make sense.  And, moving a row or column can, therefore, become problematic.  Especially when this is supposed to provide you with critical information about the health of your business.

But what happens when you grow?  You hire someone to help you.  Where’s the audit trail in that spreadsheet?  What happens if someone mis-enters a deposit as $ 10,000 instead of $ 1,000.  Or, worse yet, enters a deposit that should have been $10,000 (and only $9000 or $ 1000) was deposited- how do you check who did that?  Or, was that done to hide (i.e., steal) some money?

Then, again, how does that Excel accounting spreadsheet integrate with your invoicing program?  Your banking software?

See the problems already?

That’s why you need accounting software.  (Most vendors are abandoning desktop, unfortunately.)  The two big names (for small firms) are QuickBooks and Xero.  (There’s also Wave, but it requires more work than the 2 big guys to get the best information.)

We are agnostic.  Being certified (or ProAdvisors) for both means we know the plusses and minuses of each.  And, you can probably find folks like us who not only provide great financial advice, but pass along any discounts we get for the software to our clients.  Because we make money from our services, not from the (over-the- counter) tools we provide to help you grow your business.

In a nutshell, if you have inventory that you track in your business,  then- at least until you pass some financial thresholds, QuickBooks is your best choice.  If you don’t, then Xero should be the one you use.

Start accounting for your business success.