When you start making your first purchases for your startup, it’s easy to record them in an Excel or a Google Docs spreadsheet. You may be a spreadsheet whiz, or you you may have downloaded some free accounting templates on a website that helps people launch businesses.
Excel spreadsheets may pass muster for the first weeks, or even months, as you’re getting your business off the ground, but continuing to manage your books that way — and not using real SaaS accounting software for your startup — is simply the wrong thing to do. This is true especially when you seek investments or venture capital to grow your business; when you show potential backers your financials in a handful of spreadsheets, chances of errors are higher and it looks unprofessional.
There are certainly people who could maintain their financials for their SaaS startup in this manner. In these cases, they’d have to create very detailed spreadsheets with all the accounts and reporting elements of standard accounting. Spreadsheets like this would look a lot like accounting software, and the amount of time they’d take to set up — and verify — would be better spent on growing their business.
The disadvantages of using Excel for accounting for your SaaS startup is about a lot more than just the way figures look in a spreadsheet. There is so much that can be wrong in a spreadsheet that investors can’t take that sort of financial data seriously.
Read the rest of the article on The Startup Finance Blog.