The team at our firm sees it often — farmers and business owners using Excel to track the finances related to their operation. While it’s true that Excel is very sophisticated and most users know enough to be dangerous while maneuvering through the software, you simply can’t erase the chance for human error. Spreadsheets are just prone to errors taking place due to the amount of manual data entry that is required. For example, a formula can be set up correctly, but the copy and paste feature may not pull through the correct cells and if one cell is modified, it can throw off the entire spreadsheet. When these things happen, it causes unnecessary headaches for the business owner, which we hate to see happen.
To avoid these types of headaches all together, we encourage those we work with to make the switch to accounting software such as QuickBooks (but there are many options out there). The level of information available at their fingertips from making this simple switch is always a pleasant surprise for them and makes day-to-day tasks less cumbersome. Tracking profit by farm or by crop can be done easily by setting up classifications within the software. In addition, the software has a fixed asset tracker function to help determine depreciation for equipment. Having a good set of financial statements is imperative for farmers. Utilization of accounting software to generate financial statements saves time at year-end for the tax preparer and can assist financial institutions in expediting loan request.
A major pro to consider when deciding when to make the leap into accounting software is the fact that software allows for real time financial information to be obtained at any time, from anywhere. Unlike Excel, accounting software can pull through an automatic bank feed with the previous day’s transactions to reconcile against. Accounting software literally works hand-in-hand with your bank. Real time information is a powerful thing and that is what is fundamentally missing when not using accounting software.
It’s not uncommon for Excel users continually face frustrations. A typical scenario involves business owners finding that financial statements are not readily available which can cause issues and hold ups in regard to management or for outside users such as a bank or an accountant. If your accountant must comb through spreadsheets to prepare a financial statement for a tax return or an outside party, you will likely incur additional charges for their time.
Using accounting software allows you to record necessary details that should be monitored at all times. For example, you can record who each and every check was written to, the memo or the invoice number and more. For internal control and oversight purposes, software will also record who modified a transaction and when. This is invaluable.
Don’t let accounting software scare you. Accounting software is easy to use, is accurate, cost-effective and scalable to fit your business needs. If you take care of all financial management tasks for your farm or business, you can learn how to use the software yourself. Many places, including our firm, offer training. Transitioning from spreadsheets to using software isn’t as daunting as it sounds. We can help with that as well. Switching to accounting software can truly lighten your load, make you more aware of where your business stands financially and eliminate the risk of making an error that could throw off all of your numbers.
Brian E. Ravencraft, CPA, CGMA is a Principal with Holbrook & Manter, CPAs. Brian has been with Holbrook & Manter since 1995, primarily focusing on the areas of Tax Consulting and Management Advisory Services within several firm service areas, focusing on agri-business and closely held businesses and their owners. Holbrook & Manter is a professional services firm founded in 1919 and we are unique in that we offer the resources of a large firm without compromising the focused and responsive personal attention that each client deserves. You can reach Brian through www.HolbrookManter.com