Business records, spreadsheet bookkeeping. Who’s profit?

Not sure about this article. It lacks certainty about the weakness of modern accounting systems. It depends if you actually need one and where the line is. For example payment collection systems integrated to your web shop? That needs a system not a spreadsheet.

The majority

Apparently 60% of small businesses do their bookkeeping in spreadsheets.

I’m fine with that. In fact I love that. It gives total control to the user, no programmers trying to do it for me while claiming they can do the job better than me, a spreadsheet accountant. They can’t. Maybe artificial intelligence might be able to one day, but that day is not yet here.

Errors?

Error prone ideas are only for those who do not know what they are doing.

Amateurs. These should indeed NOT be using spreadsheets.They should be using systems that can output their entire transaction base to csv at the transaction level, I know xero can do this, others probably. Sometimes the best solution is half and half where say a sales ledger is needed for hundreds of customers, but the rest of the business is relatively simple.

MTD

VAT MTD is perfectly easy to do in spreadsheets. Pivot tables.

Any MTD, same thing.

Automation?

Where am I coming from with this? Well. A certain degree of frustration with all the attempts at automated bookkeeping. I tried using one of the cloud systems the other day. It allowed me to import a year’s worth of bank transactions and even seemed to offer to auto code (categorise) once told once. Then I realised it had to be an exact match and that meant manually arranging the import file to achieve this. Frankly it’s faster to do those records in a spreadsheet given the need to “manage” the import file.

The power of lookups

Spreadsheets can manage multiple accounts simultaneously no problem.

However, I can see how once it has been taught what a transaction is, it can then apply the same to further similar (basically identical) transactions. That’s just the same as using a VLOOKUP table in a spreadsheet, but less flexible. In addition it only offers one “column” of categories/codes. I like to use two, three or even four levels of category. Not just one. One or two is very limiting for thoughtful analysis.

Analyse this

Why do I want to analyse and sub analyse? I’ll tell you that when I see the analyses. There are obvious things like gathering all the costs of something to be capitalised. This might be all the costs to bring something to its present state for sale or capitalisation, or to evaluate a project’s success or to see how much someone is costing. The list is endless and all of those possibilities in a system will be required to be coded at the time of entry. Bulk alterations later are basically not possible, and even if possible can only be one transaction at a time. Quickbooks does have an interesting method, but it still cannot compete with a spreadsheet.

Time periods

Another thing you can’t do in a “system” is allocate a transaction to one tax year (or multiple) and a different accounts year. Nor can you specify which quarter or month, and change that as desired regardless of the transaction date, which itself can only be one date, whereas I want to be able to specify both the payment date and the (if any) associated invoice date.

Wisdom

So what is a system good for? The answer is slavish compliance for minimal effort. Just “getting the books done” without having to think. Of course there is no managing of any destiny in this approach. It is all preordained, which without the application of any wisdom is the way it will have to be. Wisdom? By definition there is no system that has this. However, if the user is a brilliant stone mason and knows zero about accounting, this may be the way things are best left.

Open banking

Assuming 100% output to csv, there is a certain attraction to being able to collect transactions from multiple bank accounts and credit cards and apply rudimentary coding, I think Receipt bank is worth a look, doubtless others. Especially if it can do paypal, ebay and Amazon. Not seen one yet that can. The problem with the likes of those, such as Amazon is that knowing the payee is Amazon, provides no clue at all to what it was for. None, and the idea in all of this whether spreadsheet or system, is not to have to linger on each transaction while figuring out what it was for and how to code it. This is the difference between many hours and a few minutes of work, perhaps monthly.

Amazon

Amazon does allow a practical solution, but requires using a business account which precludes streaming and other stuff you may not wish to lose from your Prime subscription — and you don’t want to pay two lots of Prime so as to keep that and have free delivery on the business account.

Drawing a line

Of course as soon as someone else is doing the work, a system is better. So that shows where another line is.

What can be done?

Perhaps I should write about what should be easily achieved in spreadsheets, like real time VAT reporting and “how much is mine?”. Available in real time.