Accounting Software vs Excel: Which is Best for Small Businesses?

Accounting Software

Excel Bookkeeping Templates are great if you want to manage basic bookkeeping and accounting tasks using Microsoft. Though will never be as good as full software accounting packages even though they are easy to use. You can modify most spreadsheets for your own needs. They are great for keeping track of the financial records of the company.

While basic bookkeeping in Excel might be an excellent solution, they are often not enough for reporting for small business owners. Accounting software integrates all the processes in one package and can often save you time and money.

The example below demonstrates there is a great advantage in using Accounting Software over Excel Bookkeeping Templates.

Pros and Cons of Excel Bookkeeping Templates
Pros
  • Easy to use and keep company records
  • Free downloads
  • Already familiar with Excel
Cons
  • Will not grow with the business
  • Limited to the number of transactions
  • Easy to make mistakes
  • Not Double Entry Bookkeeping
  • Limited Chart of Accounts
Pros and Cons of Accounting Software
Pros
  • All Integrated including sales invoices
  • Will grow with the business
  • Saves time and money
  • Full instructions and support
  • Accounting reports available
  • Collaborate with a bookkeeper or accountant
  • Double Entry Bookkeeping
  • Full Chart of Accounts
Cons
  • Price, although some are free
  • It may take a while to learn
  • Can be hard to get started
  • Lots of packages to choose from

QuickFile

QuickFile is completely free for up to 1000 ledger entries per year.

Automated bank feeds are an additional £15 + VAT per year, but not everyone needs to use bank feeds.

Features and pricing

QuickFile free accounting software’s main features include:

  • Trustpilot reviews score 4.8 out of 5
  • Up to 1000 Nominal transactions free
  • Capture receipts within the App
  • Quickly send estimates and turn them into invoices once approved
  • Invoice any currencies
  • Online payments using Stripe
  • Automatic payments
  • VAT returns track and file

FREE for up to 1000 ledger entries

  • Professional invoice
  • Fully branded client area
  • Purchase/Receipt management
  • Banking automation
  • MTD-compatible VAT returns
  • Estimates/Quotations
  • Full multi-currency support
  • Reporting

£60 + VAT per year for 1001 or more ledger entries
Extras include:

  • Over 400 integrations
  • No adverts
  • Advanced customisation
  • Segmented profit & loss
  • Custom trading styles
  • Invoice revision history
  • Sent email log
  • Enhanced bulk invoice entry
  • Keyboard shortcuts
  • Custom client email templates
  • VAT budget – MTD ready

ALL plans include:

  • Free unlimited users
  • 2-factor authentication
  • Regular free updates
  • Free 1 GB file storage
  • No setup fees or contracts
  • Automated backups
  • API access
  • Year-end tools
  • No software to install
Pros and Cons of Quickfile
Pros
  • It’s FREE, and you only need to pay for bank feeds or over 1000 Ledger entries
  • Unlimited users, so you won’t need to pay to add accountants, partners, etc.
  • The QuickFile accounting and bookkeeping software has multi-currency support
  • Receive online payments via Stripe
  • QuickFile comes with complete invoicing and accounting tools
  • Online community for support
Cons
  • You could go over the 1000 nominal transactions and have to pay £60 + VAT per year
  • Adverts within the software can be annoying
  • Reports are limited (hard to do month-to-month comparisons)

Sage 50cloud Accounts

Sage 50cloud Accounts helps in the following areas: taxes, banking, and management. It combines the convenience of the cloud with the power of desktop accounting software, giving you a complete view of all your business finances in one place.

Features and pricing
Sage Business Cloud Account

FREE for 1 month

Accessible on any device from anywhere, our new online Accounting software. Perfect for sole traders and small businesses.

  • Making Tax Digital Ready for VAT
  • Manage cash flow, income, expenses and payments
  • Create, send and track professional personalised invoices and quotes
  • Set up invoices to recur
  • Automatic bank reconciliation
  • Calculate and submit VAT to HMRC
  • Supports unlimited users
  • Manage and submit CIS to HMRC
  • Create and run advanced reports
  • Manage inventory
  • Multi-currency banking and invoicing
  • Snap receipts with AutoEntry and get 2 months free! (2)
Sage 50cloud Standard

Starts from £92 +VAT/month

A simple desktop accounting solution with invoicing & cash flow management.

  • Manage cash flow, income, expenses and payments
  • Create professional personalised invoices and quotes
  • Create discounts to automatically apply to invoices
  • Set up invoices and transactions to recur
  • Automatic bank reconciliation
  • Calculate and submit VAT to HMRC
  • Add extra users (additional fees apply)
  • Manage and submit CIS to HMRC (additional fees apply)
  • Create and run bespoke reports
  • Track and manage stock
  • Manage multiple companies, departments and budgets
  • Invoice & trade in foreign currencies (additional fees apply)
Sage 50cloud Professional

Starts from £186 +VAT/month

An advanced desktop accounting solution with in-depth stock and reporting

  • Manage cash flow, income, expenses and payments
  • Create professional personalised invoices and quotes
  • Create discounts to automatically apply to invoices
  • Set up contacts with individual pricing and discounts
  • Create sales and purchase orders
  • Set up invoices, transactions, sales and purchase orders to recur
  • Automatic bank reconciliation (including foreign currencies)
  • Calculate and submit VAT to HMRC
  • Add extra users (additional fees apply)
  • Manage and submit CIS to HMRC (additional fees apply)
  • Create and run bespoke reports
  • Advanced stock management
  • Manage multiple companies, departments and budgets including management reports
  • Invoice & trade in foreign currencies
Pros and Cons of Sage 50cloud
Pros
  • Sage 50 is a very sound accounting software package. One can create levels of security for individuals in an organization. One can retrieve prior year files in the software. Sage 50 actually closes out the income and expenses at the end of the year. One can not make changes to a prior accounting period in the current accounting period.
  • Sage 50 has a very strong reporting function. It can produce monthly, quarterly, and annual financial reports, such as the balance sheet, the income statement, and the cash flow statement. It can produce comparison financial statements comparing two different periods, for example, two months, two quarters, and two years. One can create custom reports from Sage 50 information using Excel and Crystal Reports.
  • Sage 50 allows an organization to customize the information that it collects from their customers, vendors, and employees. One can create an Accounts Receivable invoice or an Accounts Payable invoice to use 90% of the time. One can also alter the A/R and/or A/P invoice for a specific customer or vendor when it is required. The employee information can be customized similarly. One can keep track of employee’s birthdays.
  • Sage 50 has a strong inventory reporting system. Inventory is an important area for a business. Once the inventory is set properly, one can get several useful inventory reports.
Cons
  • Sage 50 should emphasize that a business or organization should find a local Sage 50 expert that they like. Sage 50 is a very powerful accounting software. It can be hard to set up when one looks at all the common areas for the business or organization. These areas are the chart of accounts, customers, vendors, employees, jobs and/or services, banking, and reports. One should engage an expert to get the most out of Sage 50 for their business or organization.
  • Users who are not accountants tend to have a hard time navigating the Sage 50 software. Sage 50 training should improve.
  • The job costing feature is too complicated in Sage 50. Between raw materials, work in process, finished goods, job phases, and actual and estimated income and expenses, it is easy to get confused.
  • When one opens up Sage 50 the home page can easily become cluttered and imposing. Of course, one can customize it to see what they consider important. I think very few Sage 50 users are aware that the home page can be customized.

Xero

Xero is a cloud-based accounting software packed with features and tools to simplify daily accounting tasks.  Small business owners can better manage their financial affairs using features such as bill payment, expense claims, payroll management, and inventory management.  It’s also easy to create customized quotes and invoices right on the platform.  You can then send these invoices to clients and accept payments online.

The following are key features of Xeros:

  • Customizable dashboard
  • Invoicing automation
  • Bank reconciliation
  • Expense claims management
  • Financial reporting
  • Payroll management
  • Project tracking
  • Contact management
  • Financial reports
  • Bank reconciliation
Pros
  • Cloud-based convenience.
  • User-Friendly Interface: Xero offers a clean and intuitive interface that provides instant visibility into your financial position. Whether you’re an accounting expert or a novice, Xero’s user-friendly design makes it easy to navigate and perform essential tasks efficiently.
  • Connectivity with Advisors: Xero allows seamless collaboration with your own advisors, ensuring real-time communication and fostering better financial management. By connecting with external accountants or bookkeepers, you can receive timely advice and guidance to optimize your decision-making process.
  • Cost-Effective Solution: Xero’s affordability is a significant advantage, particularly for small businesses. It offers professional-level accounting software at a fraction of the cost of traditional solutions. Additionally, Xero provides a free 30-day trial, allowing you to explore its features and evaluate its suitability for your business before committing to a purchase.
  • Real-Time Bank Feeds and Reconciliation: With Xero’s integration with banks, you can enjoy automatic and real-time synchronization of financial data. This integration simplifies bank reconciliation processes and reduces manual entry, saving time and increasing accuracy in your financial management.
  • Comprehensive Estimating and Invoicing: Xero’s estimating, quoting, and order processing system seamlessly integrates with accounts receivable (AR) invoices. This streamlined workflow allows you to generate accurate invoices quickly, improving your cash flow management and billing processes.
  • Scalability: Xero is highly scalable, accommodating the growth of businesses over time. Whether you’re a small startup or a rapidly expanding enterprise, Xero can adapt to your increasing accounting needs, ensuring continuity and efficiency.
  • Mobile Expense Management: Xero’s mobile receipt review and approval feature enables convenient management of personal expenses. Employees can track and submit expense claims on the go, reducing paperwork and streamlining the reimbursement process.
  • Unlimited Users: Xero allows businesses to have unlimited users, promoting efficient collaboration and real-time data sharing among team members or departments. This functionality enhances transparency and facilitates seamless teamwork within your organization.
  • Integration with Third-Party Apps: Xero offers easy integration with a wide range of third-party applications and plugins. This integration expands its functionality and customization options, allowing businesses to tailor the software to their specific requirements. From project management to inventory control, Xero’s integration capabilities empower you to create a personalized ecosystem that suits your unique needs.
  • Continuous Improvement: Xero consistently upgrades its software with new features, ensuring users benefit from the latest advancements in accounting technology. These updates are applied automatically, eliminating the need for manual installations and keeping your business at the forefront of accounting innovation.
Cons
  • Learning Curve: While Xero is relatively easy to install, it may take some time for users to fully grasp its functionality and utilize it effectively. Adequate training and familiarization are recommended to maximize its potential and avoid any potential challenges. However, Xero provides intuitive interfaces and comprehensive training resources to help users overcome the learning curve.
  • Pricing Changes: Xero recently increased its prices and no longer includes built-in payroll with its plans. It is crucial for businesses to carefully evaluate the costs and features associated with different pricing tiers before making a decision. Consider the value and functionality Xero provides in relation to the revised pricing to ensure the selected plan aligns with your business requirements.
  • Basic Requisition and Inventory Management: Xero’s requisition, purchase, and inventory management capabilities are considered basic, lacking more advanced features that some businesses may require. If your organization has complex inventory management needs, you may need to explore additional solutions or plugins to supplement Xero’s capabilities in this area. However, Xero’s integrations with inventory management apps provide opportunities to expand functionality and meet specialized requirements.
  • Limitations on Certain Features: Xero’s support for expense claims, projects, and multi-currency functionality is limited to the most expensive plan. This limitation may restrict access to these features for businesses on lower-tier plans. It is important to carefully evaluate your specific needs and consider the available plans to ensure you have access to the required features without unnecessary costs.
  • Absence of Built-In Debtor Chasing: Xero lacks a built-in function for debtor chasing, requiring businesses to manually follow up on unpaid invoices. This may add an additional administrative burden for organizations seeking automated debt collection processes. However, businesses can explore third-party apps and integrations to streamline their debtor chasing activities and automate payment reminders.
  • Lack of Support for Exchange Traded Products (ETPs): Xero does not support Exchange Traded Products, potentially limiting investment tracking capabilities for businesses operating in this area. Organizations with extensive investments in ETPs may need to explore alternative solutions to meet their tracking and reporting requirements. However, Xero’s flexibility and integration capabilities allow businesses to integrate specialized investment tracking software for comprehensive portfolio management.
  • Performance Issues: In certain cases, heavy reliance on online operations or processing a high volume of sales through PayPal may impact Xero’s performance, leading to slower response times. It is advisable to consider your specific operational requirements and evaluate the software’s performance under your expected workload. Monitoring system performance and engaging with Xero’s support team can help ensure optimal performance for your business.
  • Customer Service: Some users have reported challenges with Xero’s customer service, citing longer response times and unhelpful advisors. While not the experience of all users, businesses should be prepared to potentially encounter delays or difficulties when seeking assistance from Xero’s customer support team. Exploring Xero’s support resources, community forums, and engaging with their customer support channels can provide additional avenues for assistance and problem-solving.

Does a small business need accounting software?

In most cases, yes. There are some exceptions, for example, if you are a sole proprietor and only work with a few clients or customers. But in general, bookkeeping or accounting software will likely help run your business more efficiently.

Can I do my own small business accounting?

Yes, you can! But if you scale your business, it would obviously make sense to hire a qualified Accounting Technician, which is where Any Other Business can help.

Click here for more information on Bookkeeping Services offered by Any Other Business.