Table of contents
Table of contents
The long and the short of it is, yes, you can absolutely use a spreadsheet to do your accounts. Before you stop reading, though, you should consider the possibility that there might be a better way.
Spoiler alert: there is.
In this article we explain different methods for keeping good records in your business, and how Making Tax Digital will have an impact on this.
About 9 out of 10 spreadsheets contain errors of some kind. They can also be very confusing to work with, especially if you’re dealing with lots of different figures from various sources, all of which you have to enter manually.
So with that in mind, inaccurate data is probably the biggest risk with using a spreadsheet. Which isn’t great if you’re relying on the data for your tax return.
Reporting your taxable earnings to HMRC is a legal requirement, and it’s your responsibility to make sure all the information is accurate and up-to-date. You want to make sure you’re recording everything in your business using the best (and most efficient) method available.
The reality is that even a minor mistake on your spreadsheet can earn you a not insignificant fine from HMRC (never nice).
Thankfully, there are a number of steps you can take to reduce the likelihood of errors in your spreadsheets tripping you up.
We’ll go over a few.
Account reconciliation means checking one set of data against a different set of data to make sure it matches up. For instance, doing a bank rec involves checking the list of bank transactions in your bookkeeping against your bank statement.
Yes ok, this also means reconciling yourself to a few hours of tedious data checking, but it’s better than getting your tax bill wrong.
You can also use double-entry bookkeeping to help you make sure your records match. Like the name suggests, this is a process of recording each transaction twice so that it appears in different places. The total amount of both entries will ‘equal’ or ‘balance’ each other.
Having another set of eyes (especially such well-trained ones) look over your spreadsheets can be a huge plus. You might even just pass your bookkeeping over to them entirely, rather than wading through that spreadsheet yourself.
While the idea of spending money on fees might be a concern, lots of businesses find hiring a professional saves them more money than they cost.
They’ll also be able to help you reduce your tax bill by making sure you claim everything you’re entitled to.
Yeah ok. If you spotted the big Pandle logo at the top of the page then you might already know we make online accounting software. We were always going to mention it in an article about spreadhseets. Busted.
The bottom line though, and yes that’s an accounting pun, is that while spreadsheets certainly have their uses, there are more efficient ways to keep financial records.
Good accountaing software will help you save time by automating more of the manual stuff, which in turn reduces the risk of manual errors. Online accounting also means all your data is safely held on a secure online server so you can access it whenever you need to.
Most online accounting software (like Pandle) is available as a monthly subscription as opposed to a lump sum payment, allowing you to spread the cost over a longer period. Other software is also available though. We just like ours best.
Making Tax Digital rules require some taxpayers to keep financial records digitally (which you can use a spreadsheet for), and to submit this information to HMRC using special software. Some online accounting software will allow you to meet both requirements, but a spreadsheet won’t.
Anyone using a spreadsheet will need to use bridging software (because it bridges the gap between HMRC and their records) to make their submissions.
Learn more about using Pandle to make business accounting easier. Create an account today and decide what to do with all the extra time you get back.
AAT Level 3 qualified, I’ve worked in the finance sector since 2017. When I'm not in Pandle HQ, you'll find me hiking and playing the drums.
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