9 min read
If you run a small business with relatively straightforward transactions, you may wonder whether you really need bookkeeping software. Can you simply keep track of everything in Excel or Google Sheets instead?
For many small businesses, the answer is yes, you can. Accounting software is not necessarily required simply because you are running a business. What matters is whether your bookkeeping system allows you to maintain proper and complete records of your business transactions.
The more important question, therefore, is not which software should you use?
It is:
What does your bookkeeping system need to do?
Once you understand that, it becomes much easier to decide whether a spreadsheet is sufficient or whether an accounting software would make managing your records more efficient.
👁️🗨️ At a Glance
- You do not necessarily need accounting software simply because you run a business.
- A spreadsheet may be sufficient for a business with straightforward transactions and manageable transaction volumes.
- Recording money coming in and going out is useful, but it is not complete bookkeeping.
- Accounting software becomes more useful as transaction volume and business complexity increase.
- Whether you use a spreadsheet or accounting software, your transactions still need to be understood and accounted for correctly.
💡 Prologue Tip
Do not choose your bookkeeping system based on the number of features it offers. Choose it based on what your business actually needs to record, manage and account for.
1. Start With What Your Bookkeeping System Needs to Do
Before deciding whether to use a spreadsheet or accounting software, it helps to separate the tool from the job it needs to do.
Your bookkeeping system needs to capture the transactions of your business and organise the information so that proper accounting records can be maintained and financial statements can ultimately be prepared.
It also needs to allow the records to be checked and reconciled. For example, the bank balance in the accounting records should be reconciled to the bank statement, with any differences identified and resolved. The accounting records should also be checked for errors, omissions or inconsistencies rather than simply carrying them forward.
That means the quality of your bookkeeping does not depend simply on whether you use Excel, Google Sheets or accounting software.
A sophisticated accounting system can still contain poor records if transactions are missing, incorrectly described or wrongly accounted for. Conversely, a simple spreadsheet can work well for a small business if the underlying information is complete, organised and properly maintained.
2. Tracking Income and Expenses Is Not the Same as Bookkeeping
Many small business owners start by recording money received and money spent. That is useful, but it is only part of the bookkeeping process.
First, a bank transaction does not necessarily tell you how it should be accounted for.
For example:
- S$20,000 comes into your bank account. It could be sales revenue, a loan, capital introduced by the owner or a deposit received from a customer.
- You pay S$3,000 for equipment. Money has left the bank, but the purchase may need to be recorded as an asset rather than simply as an expense.
- You repay S$1,000 of a business loan. The full payment is not necessarily an expense because part of it may be repayment of the amount borrowed.
The bank statement tells you how much money moved and when. It does not necessarily tell you what the transaction represents.
Bookkeeping also involves making sure the transactions have been recorded completely and correctly. The accounting records should be checked and reconciled, including reconciling the recorded bank balance against the actual bank statement and investigating any differences.
Depending on the business, the records may also need to keep track of amounts owed by customers, amounts owed to suppliers, loans, fixed assets, deposits, GST and amounts owing to or from the owner or directors.
Bookkeeping is therefore more than keeping a list of money in and money out. It is about maintaining accounting records that are complete, properly classified, checked and reconciled.
3. What a Small Business Owner Can Do Themselves
You do not necessarily need to do the accounting yourself to play an important part in the bookkeeping process.
As the business owner, you are usually in the best position to explain what each transaction was for and provide the supporting documents. Clear and complete information helps ensure that transactions can be accounted for correctly.
You know what happened in your business. Your accountant knows how it should be accounted for.
Providing clear information when transactions occur also reduces the need to reconstruct what happened months later.
💡 Prologue Tip
If you are using a spreadsheet, download your bank transactions into it rather than manually entering information such as the date and amount. Better still, when making a payment through your bank, enter a meaningful description of what the payment is for so that description appears in the downloaded bank transactions.
4. When a Spreadsheet May Be Enough
For a small business with straightforward transactions and a manageable volume of activity, a well-maintained spreadsheet may be perfectly adequate.
A spreadsheet can work particularly well where:
- most transactions pass through one or a small number of bank accounts;
- there are relatively few transactions to record;
- sales and expenses are straightforward;
- there is little complexity involving customers owing money, suppliers to be paid, inventory or other accounting matters; and
- the records and supporting documents are kept consistently.
Using a spreadsheet does not mean that accounting knowledge is unnecessary. The spreadsheet is simply the tool used to maintain the records. The transactions still need to be classified correctly, the records checked and reconciled, and accounting matters dealt with appropriately. If you are maintaining the books yourself, you therefore need sufficient bookkeeping knowledge to do this correctly.
There is no need to adopt accounting software simply because it appears more professional. If a simple system captures the information you need and allows proper accounting records to be maintained, adding software may create cost and administration without providing much additional value.
However, a spreadsheet that works well when a business is small may become cumbersome as the business grows. That is when the question changes from “Can I continue using a spreadsheet?” to “Is using a spreadsheet still the most efficient way to manage this?”
5. When Bookkeeping Software Starts to Earn Its Keep
Accounting software becomes more useful when the bookkeeping process itself starts becoming more complicated or time-consuming.
This may happen when you have:
- a growing number of transactions;
- several bank accounts or payment channels;
- significant amounts owing from customers or to suppliers;
- GST reporting requirements;
- inventory to track;
- recurring transactions;
- several people working with the financial records; or
- a need for more timely information about how the business is performing.
Software can reduce manual work through features such as bank feeds, invoice generation, transaction matching, document capture and recurring entries.
But the number of features is not the reason to adopt software.
Software starts to earn its keep when it solves a real problem in your bookkeeping process.
For one business, that point may arrive quite early. For another with simple transactions, a spreadsheet may continue to work well for considerably longer.
Software Does Not Replace Accounting Knowledge
Automation can make bookkeeping faster, but it does not remove the need to understand what a transaction represents.
A bank feed may import the correct date and amount. Receipt-scanning software may extract information accurately. A system may even suggest how a transaction should be categorised.
But an accurately imported transaction can still be incorrectly accounted for.
The quality of the accounting records therefore depends not only on how efficiently information enters the system, but also on whether the transactions are treated correctly.
This is also why changing from a spreadsheet to accounting software does not automatically fix poor bookkeeping. If the underlying information is incomplete or the accounting setup is wrong, software may simply process those problems more efficiently.
6. So Which Bookkeeping System Should You Use?
There is no single bookkeeping system that is right for every small business. The better question is whether your current system still works well for the way your business operates.
Consider:
- Completeness: Does your system capture all the information needed for your accounting records?
- Supporting documents: Can invoices, receipts and other documents be easily matched to the relevant transactions?
- Accuracy and control: Can the records be checked and reconciled efficiently?
- Complexity: Can the system comfortably handle your transaction volume, GST, amounts owing by customers or to suppliers, multiple bank accounts or other features of your business?
- Efficiency: Are you spending increasing amounts of time maintaining spreadsheets, reconciling information or doing work that software could automate?
- Accounting output: Can proper accounts be prepared reliably from the records you maintain?
If a simple spreadsheet continues to meet those needs, there may be little reason to replace it simply for the sake of using accounting software.
But when maintaining that spreadsheet becomes increasingly complicated, time-consuming or difficult to control, accounting software may start to justify its cost.
The right bookkeeping system is not necessarily the most sophisticated one. It is the one that can handle your business reliably without creating unnecessary work or complexity.
Need Help With Your Bookkeeping?
If you are unsure whether your current bookkeeping system is adequate, or whether moving to accounting software would make sense for your business, Contact Prologue for accounting and bookkeeping support.
We can help you consider what information your business needs to maintain and how your bookkeeping records can be organised to support your accounting and tax requirements.
Continue Building Your Business
Visit our Knowledge Hub for practical guidance on accounting, tax and running a business in Singapore.
Stay informed
Subscribe to our monthly newsletter to receive practical insights, useful resources and timely reminders to support your business journey.
→ Subscribe to Our Newsletter
This article provides general information only and does not constitute accounting, tax or legal advice. The appropriate bookkeeping system will depend on the circumstances and complexity of your business.
🏛️ Official Resources
For the latest regulations and official guidance, refer to: