Excel for Accounting and Bookkeeping: When It's Time to Move On

Plenty of small businesses start doing their books in Excel. Income in one column, expenses in another, a sheet per month, some SUM formulas at the bottom. When you’re a sole trader or a micro-business, it’s genuinely adequate. You can see what came in, what went out, and whether you’re ahead or behind. Your accountant might sigh a little at tax time, but they can work with it.

The question isn’t whether Excel can do bookkeeping. It can. The question is when the cost of doing it in Excel — in time, errors, and missed insights — exceeds the cost of moving to something better.

Where Excel Bookkeeping Works

Let’s be honest about when a spreadsheet is perfectly fine:

• Sole traders with simple income — you invoice a handful of clients, pay a handful of bills, and need to track it for your tax return
• Cash-basis businesses — money in, money out, no complex accrual accounting needed
• Very low transaction volumes — fewer than 50 transactions a month
• No employees — no payroll, no super, no STP reporting
• Your accountant handles the rest — you give them the spreadsheet, they do the BAS and tax return

If that’s you, a well-structured Excel workbook with an income sheet, an expense sheet, and a summary sheet is genuinely all you need. Format your dates consistently, categorise every transaction, keep your receipts, and you’re compliant.

The BAS Problem

For most Australian businesses, the Business Activity Statement is where Excel bookkeeping starts to hurt.

BAS requires you to report GST collected on sales, GST paid on purchases, and (for many businesses) PAYG withholding — quarterly or monthly. Getting these numbers from Excel means:

• Ensuring every transaction has the GST component correctly calculated and recorded
• Separating GST-free items from taxable ones
• Handling mixed invoices where some line items attract GST and others don’t
• Reconciling your GST figures against your bank statements
• Producing numbers your accountant or BAS agent can verify

In Xero or MYOB, the BAS is essentially pre-filled. Every transaction you code flows into the right GST category automatically. At BAS time, you review a report, check for anomalies, and lodge. In Excel, BAS prep is a manual exercise that takes hours — cross-referencing transactions, recalculating GST, and hoping nothing was miscategorised.

The Reconciliation Gap

Bank reconciliation is the process of matching your accounting records against your actual bank transactions. It’s how you catch errors, find missing entries, and confirm that your books reflect reality.

In accounting software, you connect your bank feed, and transactions flow in automatically. You match each one to an invoice or expense, and the system flags anything unmatched. It takes minutes per day.

In Excel, reconciliation means downloading a bank statement (CSV or PDF), comparing it line by line against your spreadsheet entries, marking off each match, and investigating discrepancies. For a business with 200 transactions a month, this is a full afternoon’s work. For 500 transactions, it’s a multi-day exercise that most people defer until the accountant demands it.

The businesses that defer reconciliation are the ones that discover missing transactions, duplicate payments, or fraud months after the fact — when it’s too late to easily fix.

When Xero or MYOB Is the Right Move

For most small businesses, the right step up from Excel isn’t custom software — it’s cloud accounting software. Xero and MYOB are the dominant players in Australia, and they handle the pain points above out of the box.

Move to cloud accounting when:

• Your transaction volume makes manual tracking painful (roughly 50+ per month)
• You need to lodge BAS and want the GST calculations handled automatically
• You have employees and need payroll, superannuation, and STP compliance
• You want bank feeds for easier reconciliation
• Your accountant wants real-time access to your books (most do)

Both Xero and MYOB offer affordable plans for small businesses, and the time savings alone justify the cost within the first quarter. If your accountant has a preference, go with their choice — the biggest value of cloud accounting is that your accountant can access your data directly instead of waiting for you to email a spreadsheet.

When You Need More Than Accounting Software

Here’s where it gets interesting. Xero and MYOB are excellent at accounting. They track income, expenses, GST, payroll, and produce financial reports. What they don’t do well is connect your financial data to your operational data.

For example:

• Job costing — Xero can tell you total revenue and total expenses, but connecting specific costs to specific jobs requires either manual tracking codes or third-party add-ons that don’t always work cleanly
• Quoting to invoicing flow — most accounting software handles invoicing, but the link between a quote, the approved scope, and the final invoice is often manual
• Operational reporting — your accountant wants a P&L statement. You want to know which types of jobs are most profitable, which customers are most valuable, and where your margins are slipping. Accounting software answers the first question but struggles with the second
• Multi-system data — when your financial data needs to combine with project management, inventory, CRM, or scheduling data, accounting software becomes one silo among several

This is the space where custom software makes sense. Not to replace Xero or MYOB — they handle compliance and core accounting better than anything custom-built could — but to sit alongside them and handle the operational layer that accounting software wasn’t designed for.

The pattern we see most often: a business graduates from Excel to Xero, which solves the bookkeeping and compliance problems, but then struggles with the gap between what Xero knows (financial transactions) and what the business needs to know (job profitability, resource utilisation, operational efficiency). That gap usually gets filled by… more spreadsheets. And the cycle starts again.

Making the Most of Excel While You’re Still Using It

If you’re not ready to move yet, these steps will reduce the pain:

• Use a consistent chart of accounts — create a dropdown list of income and expense categories and use it for every transaction. Inconsistent categorisation is the single biggest source of BAS errors.
• Record GST separately — don’t just record the total amount. Have columns for “Ex-GST Amount,” “GST,” and “Total.” This makes BAS preparation dramatically easier.
• Reconcile monthly, not quarterly — the longer you leave it, the harder it gets. A monthly reconciliation catches errors when they’re still fresh and fixable.
• Keep a running GST summary — a simple sheet that totals GST collected and GST paid month by month gives you a real-time view of your BAS obligation.
• Back up religiously — your Excel bookkeeping file is your financial record. If it corrupts or gets lost, you’re reconstructing your books from bank statements and receipts. Save dated copies weekly at minimum.

Excel bookkeeping is a reasonable starting point. Cloud accounting is the natural next step for most businesses. And when your financial data needs to connect to the rest of your operations, that’s when purpose-built software closes the gap that neither Excel nor accounting packages were designed to fill.