Excel vs. accounting software: Key differences & which to use

Many software systems charge a one-time fee for installation or setup, while others have a monthly or yearly subscription fee. It's helpful to determine which pricing model works best for the business and includes all the necessary features and functions.

Meanwhile, Excel tends to be cheaper than many accounting systems. But the cost of a tool like Excel has nothing to do with the sticker price. It’s all about how much time it requires to manage. Unfortunately, Excel involves a lot of working hours.

You’ll need to enter every business expense by hand. If you practice double-entry bookkeeping, you’ll need to enter every transaction twice. That’s double the manual data entry.

This means that everything from expense reports to the chart of accounts requires manual entry. Not only does this take time, but it also increases the risk of error. Just how much does this cost small businesses?

5. Accuracy

Winner: Accounting software

Accuracy is crucial in accounting. Manual data entry is one of the main culprits of accounting errors. Accounting software removes the need for manual data entry by automating processes such as bank statement reconciliations and invoice tracking.

Meanwhile, spreadsheet errors can have a waterfall effect. Mess up one input with an incorrect digit or a misplaced comma or decimal point, and your spreadsheet will use that to miscalculate other computations.

For example, a small spreadsheet error cost Canadian power generator TransAlta $24 million in 2003. According to The Register, CEO Steve Snyder said the mistake was “literally a cut-and-paste error in an Excel spreadsheet.”

Modern accounting systems should go beyond recording data—they should help you make sense of it.

For example, Intuit AI agents can answer common questions, suggest next steps, and even guide you through tasks like setting up invoices or reconciling accounts. By combining automation with intelligent support, these tools make managing your books faster and less stressful.

Pros and cons of using Excel for accounting

Excel is a popular spreadsheet program used by businesses of all sizes for financial analysis, data management, and other tasks. Key advantages of Excel include:

• Flexibility: Excel is a powerful tool for various tasks, from simple data entry to complex financial modeling. Users can customize the program to suit their specific needs, creating custom Excel accounting formulas, macros, and charts. It’s also useful for inventory management.
• Accessibility: Almost everyone has access to Excel, making it a convenient and universally recognized tool for data analysis. It's easy to share files and collaborate with others, even when working remotely.
• Cost-efficient: Excel is readily available at a low cost or sometimes even for free. It's often a part of the Microsoft Office suite, which many businesses already have installed on their computers.

While it has many advantages, it also has its drawbacks. Let’s explore the cons of using Excel:

• Limited capacity: Excel has limits in terms of capacity. Large amounts of data can slow down the program and cause errors. Furthermore, as the complexity of the analysis increases, the probability of errors occurring also increases.
• Manual entry: Excel requires manual data entry, which can be time-consuming and prone to human error.
• Accessibility: Excel files can quickly become outdated, making it difficult to keep track of changes and conflicts. This can cause confusion and errors, particularly when multiple users are working on the same file.

While Excel may be appropriate for small businesses or simple financial analysis, more complex businesses may need additional software to accommodate their requirements.

Pros and cons of accounting software

When it comes to balancing the books and managing finances, businesses have a range of software options. Here are the top advantages of accounting software:

• Scalability: Accounting software is often more scalable than manual accounting methods. As businesses grow, accounting software can handle more data, automate more processes, and offer more features. This can be especially useful for fast-growing companies that need to keep up with increasing levels of financial complexity.
• Time-saving: One of the most significant benefits of accounting software is that it can automate many mundane financial tasks, such as processing payroll. This can free up time for business owners or finance professionals to focus on other areas of the business that require attention. From invoicing and billing to inventory management, accounting software can handle many financial processes quickly and accurately.
• Accuracy: Accounting software can help reduce human errors, which can have a massive impact on a business's financial health. By automating processes, accounting software minimizes the risk of manual errors in financial statements, income statements, and balance sheets. It can also make tax returns much more accurate, ensuring businesses avoid costly mistakes and penalties.

On the other hand, like any software, accounting platforms have disadvantages, like:

• Cost: While accounting software is more efficient, it can also be costlier than manual accounting methods. Many software solutions require a monthly or annual subscription fee. Additionally, there may be additional costs for technical support, data migration, and training.
• Usability: While many accounting software solutions are user-friendly, there can still be a learning curve when utilizing them to their fullest potential. For those unfamiliar with the software, adapting to it may become time-consuming and frustrating.
• Security: Accounting software can also be susceptible to security risks like all other software. In response, vendors have attempted to secure these platforms with high-level security features. However, this may not entirely address the issue of cybersecurity, and there is always the risk of data breaches.

While the upfront costs might be more for accounting software, the potential rewards of better financial management, streamlined processes, and accurate reporting can make it a valuable investment for any business.

How to choose between Excel and accounting software

Excel might work when you first start your business or if you only have a few financial transactions a month. However, if you’re doing several hundred transactions and have a bunch of accounts to keep track of, it’s time to consider accounting software.

As your company grows, things change—you might change your prices, raise financing, roll out a few new products, or hire more people. Before you know it, your spreadsheet can’t keep up with your business finances. This is especially true if you need to create financial statements and track accounts receivable and payables.

Eventually, you may even consider automated accounting and the advantages of putting parts of your financial management on autopilot.

Common mistakes to avoid when using Excel or accounting software

Even the best tools can cause headaches if you don’t use them correctly. Whether you rely on Excel or accounting software, avoiding these common mistakes will help you keep your finances accurate and your processes efficient.

What are some Excel mistakes to avoid?

Relying on one spreadsheet for everything. Using a single sheet to track all your financial data may seem convenient, but it increases the risk of errors and makes troubleshooting difficult.

Forgetting to back up files. Excel doesn’t automatically save data across devices or to the cloud. Without regular backups, you risk losing critical financial records.

Using formulas without double-checking. Even a minor typo in a formula can cause cascading errors across your entire workbook. Always review calculations and test formulas before relying on them.

What are Accounting software mistakes to avoid?

Not customizing your chart of accounts. Sticking with the default setup might limit how accurately you can track income and expenses. Tailor your chart of accounts to fit your business.

Skipping regular reconciliations. Just because accounting software automates entries doesn’t mean you can ignore reconciliations. Failing to review your accounts regularly can cause small errors to snowball.

Overlooking staff training. Accounting software is packed with powerful features, but without proper training, you and your team may not take full advantage of them.

Streamline your accounting and save time

Both Excel and accounting software can help you manage your books, but they serve different purposes. The right tool isn’t just about cost—it’s about choosing a system that supports your long-term growth and keeps your business finances accurate and stress-free.

Accounting software, like QuickBooks, delivers more value—saving time, reducing errors, and giving you clear financial insights.

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