I am constantly amazed at the number of small business owners that are using Excel for their accounting software. Cringe is probably a more accurate description of my reaction. The typical small business is tight on cash. That is common knowledge. In most cases the owner has funded the initial startup or has secured a small business loan. Either way, frivolous spending is not an option. Since Excel is part of the Microsoft office suite we have it without paying extra. That sounds like a no brainer to use what you already have instead of using funds to purchase another product. Excel is an amazing product but is not a replacement for proper accounting software. Owners need data that provides financial information that can be used to drive and grow their business. By believing that purchasing accounting software is a luxury and not a necessity is a huge mistake. This is an example of not treating your business as a real business. This brings the question to mind; do you have a business, or do you have a hobby?
If you have a business, then treat it that way. Even if your business is small, even a startup, certain items need to be addressed. View this as getting your business ducks in a row. In addition to the proper software there are other items that should be undertaken to get your business ducks in a row:
- Separate the business from your personal finances. The business needs to have its own bank account. You should not be mixing business and personal funds.
- If you need a credit card for business expenses obtain one in the business name. Break the habit of using your personal credit card for business. Conversely, do not use a business credit card for personal expenses.
- Use software to track all expenses paid for the business with personal funds (before addressing number 1 and 2 above) as either a loan to the business that will be paid back or a capital contribution.
- If you use a vehicle for business keep record of your mileage and expenses.
- Obtain professional insurance coverage.
- Use technology to secure your company data.
- Surround yourself with experts in fields not related to your competency.
If you determine that you only have a hobby, then don’t worry about the above list. Focus on having fun.