Should Startups Use Spreadsheets or Apps for Accounting & Customers?
This is a question that every new business has to consider — should you use a spreadsheet for your financial transactions or go directly to an accounting app? Should you use a spreadsheet for customer relationship management (CRM) or a CRM app?
I've founded several businesses and have struggled with this question many times over the past 30 years. I'm sharing my conclusions here to help other startups.
I should point out that I'm not an accountant but I'm pretty comfortable with accounting. I design business simulations with fully functional accounting modules. I teach a highly-rated online accounting course with tens of thousands of students enrolled. And, I've designed and set up many CRM apps.
Despite my comfort with accounting and CRM apps, I have recently switched back to using spreadsheets for some of my businesses. I'll explain why and offer a detailed comparison to help you make the right choice for your new business.
Start Logging Right Now!
The best advice I can give any new business owner is to start logging your financial transactions and customer information right away. However you do it, just do it. Don't let everything sit in a box or scattered in your email. And be sure your log is backed up in the cloud.
You will regret it later if you have to spend hours trying to figure it all out, or pay big money for someone else to do it for you — and they will still need hours of your time, so you will end up paying twice in money and time.
Why Is This A Difficult Decision?
Because you don't know what your new business needs — yet.
Even if you are an experienced businessperson, you won't know the best way to operate your new business until you start running the business.
You won't quite know the best CRM systems and processes needed to win and support customers.
You won't quite know the best accounting accounts to track or which transactions take the most time.
Don't spend your precious startup time fiddling with accounting and CRM apps. Spend that time getting to market quickly and winning customers profitably.
At that point, you will have the information you need to choose the best accounting and CRM solutions for your new business. Because it won't be new anymore. There will be fewer unknowns and you will be ready to scale.
At the same time, do not neglect tracking your accounting and customer information. Do it from day 1. And keep up with it. Start with a well-formatted spreadsheet and tweak it as you go.
When is the right time to switch to apps? It depends on your business. It might be after a few months, one year, two years, or never.
Let's Compare — Spreadsheet Versus App
Learning Curve
- Spreadsheets are familiar and typically easier to start using than learning new apps.
Setup
- Both spreadsheets and apps require some type of setup to align them to your business needs. Templates are typically available to speed up this process, but with apps it can be confusing to choose the right template when you are not yet familiar with the app.
Convenience
- When you have to frequently add and edit data, it's better if the software is quick to launch or keep open without having to constantly log in or require many clicks to get to where you need to go. I find that a spreadsheet tends to be more convenient in this regard than most apps, particularly with accounting transactions.
*Big Picture View *
- Apps have custom screens for everything, which means you end up in the weeds rather than viewing the bigger picture which seems more natural with a spreadsheet.
Accuracy
- Spreadsheets are easy to use but also easy to make mistakes with. Apps designed for a specific purpose tend to reduce errors because of their custom interfaces and other error-checking features.
Versatility
- Spreadsheets are limitless, which means you can store any information you want in the same document. Apps are more focused and less flexible.
- Apps provide reports with a few clicks, whereas spreadsheets require extra work.
- With spreadsheets, some activities (like invoicing) require more manual work or are not feasible to do (like payroll accounting and payment processing) — but can be done easily with apps.
Cost
- Spreadsheets tend to be free or less expensive in the long run than apps. Not always, but typically.
Scalability
- Both spreadsheets and apps typically have infinite scalability (more data and more users), but spreadsheets become difficult to manage as your data grows. Apps are better for scalability — but may also be much more expensive.
- If your business grows, you will likely want to move away from spreadsheets to apps.
Collaboration
- Both spreadsheets and apps have collaboration features, but apps tend to be better for collaboration. This makes it easier for multiple people to use the software at the same time with less risk of losing data.
Mobility
- Both spreadsheets and apps can be used on smartphones but spreadsheets tend to be clumsy on devices with small screens. Apps typically have interfaces optimized for small screens making them easier to use and less likely to induce errors.
Real World Examples
Here's my experience:
- My main business has many products, processes hundreds of sales (thousands actually but we roll them up), has several employees, works in multiple currencies, has shareholders, and most everything else a mature business has. This business uses CRM and accounting apps and I have a full-time person who manages the accounting and multiple people handling CRM. Spreadsheets would not work well for this business. They would have been ok the first few years but not after that.
- I have a side hustle business that has one product, no employees, no other shareholders, and sales that are handled by resellers like Amazon and Walmart. In total, this business requires less than 100 accounting transactions to be posted each year. I started using an accounting app for this business from day one. That was a mistake. The next few bullets explain why.
- Even though there are few transactions, every time I went to post one, it was a tedious process to launch the accounting app, find the right menu option, and make choices in a bunch of fields — most of which I never use. Because of this inconvenience, I would avoid posting transactions as they happened and instead set them aside to do later. But when later came, I had to spend time trying to find the source information and remember how to properly categorize everything.
- Then at the end of the fiscal year, it would take hours to close out the system so I could hand over the financials to the accountants to prepare the tax return.
- I have now switched to using a spreadsheet for the common transactions. It's quick and easy. And at the end of the year, I roll up the transactions in the spreadsheet and make a few larger entries in the accounting app. I have not discontinued the accounting app, I'm just using it in a more efficient way. This is my recommendation for other startups in the same situation. Use a spreadsheet then roll everything up into the accounting software at the end of the year (or end of each quarter or month depending on your tax and other needs). You can save money by doing the spreadsheet transactions yourself (or an affordable assistant) and pay someone to handle the accounting app which requires more skill.
- To keep things simple, try to minimize the number of accounts in the accounting app. As an engineer, I tend to strive for more detail rather than less, so I initially created a lot of accounts so I could track every type of revenue and expense closely. But as an entrepreneur, I've learned that tracking such detail takes more time to do. And I rarely have the time to look at the results, so why spend time tracking data that is never going to be actionable? Doesn't make sense. Keep it simple to start. Then as you discover what's important in your business, you can expand to track more data.
Tools I use
- Google Sheets— I like having online access from any of my devices, plus the version history is nice to have. I use other Google products so I rarely have to log in, just one click and I'm in. Microsoft Excel (online) is a good alternative (and better than Google Sheets in some ways).
- Business Management Spreadsheet— I created this template for managing the main aspects of any business, including accounting, customers, inventory, tasks, employees, suppliers, taxes, and more. It's available here for free with a tutorial video, startup guides, and more.
- Wave Accounting — Free online accounting app. I use this for all of my smaller businesses. It works well. It's missing some features like check printing, which seems crazy to me, but it's hard to argue with free.
- Quickbooks Online— I've been using Quickbooks (first offline then online) for my main business for well over 20 years. It works well but what I do not like is how Intuit keeps raising prices and with very little notice to customers (because it's hard to switch accounting apps). Because of this, I can't give a recommendation. An alternative is Zero.
- FreshDesk— Designed as a customer support system, we use it for both customer support and CRM (even though it's not designed for CRM). A free version is available. There are many CRM apps you can research.
- [Coda.io](http://coda.io/) — A modern platform that combines text, spreadsheets, and databases. I create custom documents to fill the gap where our other apps fall short.
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I'm Mathew Georghiou and I write about how games are transforming education and learning. I also share my experience as an entrepreneur inventing products and designing educational resources used by millions around the world. More about me at Georghiou.com