Using Excel for business budgeting: pros, cons, and when to automate
As the founder of a growing business, you know how important it is to explore money management tips and create healthy habits early on — including establishing a budget. For many, Excel becomes the go-to tool when taking those initial steps into budgeting, offering a familiar and accessible platform to understand their finances.
However, the financial management journey inevitably reaches a crossroads: should you continue down the path of manual data input or pivot toward the utopia of automated budgeting software?
In this article, we’ll dive into the pros and cons of using Excel for budgeting and help you pinpoint the signs you might need to upgrade to an automated system.
What is budgeting?
Budgeting is the process of creating a plan to manage your money. By having a budget, you can make sure you don’t spend too much, can afford your expenditures (such as operational costs, payroll, and inventory), and can save for future goals or emergencies.
How to create a budget spreadsheet in Excel
Have you ever found yourself staring into the seemingly infinite cells of an Excel spreadsheet, sipping your third coffee, and wondering if there’s a less brain-buzzing way to pull together your finances? We’ve been there.
Let’s break down the process of using Excel to budget so you can save yourself some time (and a headache) when you need to bust out the spreadsheets.
How to build a budget in Excel using templates
If you’re just dipping your toes into the exciting world of business budgeting, using an expense report template can be a great place to start. Excel provides a variety of templates designed to cater to diverse business needs, simplifying setup and offering a structured format that can easily be tailored to your financial planning.
Here’s how you can use a template to create a budget in Excel:
Open Excel and navigate to the “File” tab.
Select “New” and browse through the available templates (or you can use other free templates — they don’t have to be Excel’s).
Search for “Budget” and explore the options available, choosing one that resonates with your business needs.
Click on the chosen template and select “Create.”
Begin inputting your financial data into the predefined fields.
Adjust categories and values as per your business specifics.
Review and save your budget!
How to build a budget in Excel manually
Creating a budget from scratch might sound tricky, but the extra effort is worth it to some. Manually making a budget in Excel gives you the freedom to build a budget that's completely customized for your business.
Let’s walk through how to do this:
Open Excel and start with a blank worksheet.
Title your worksheet and create headers for various financial categories (such as date, expenses, cost, income, balance, and notes).
Under each header, list the relevant subcategories (like “salaries” under “expenses”).
Insert your financial figures corresponding to each subcategory.
Calculate the balance by entering the formula “= income - cost” in the formula tab just above the spreadsheet, or choose the field in which you want the balance to display and input the formula into that field.
Use visual aids, like graphs or charts, to represent data visually for easier analysis.
Be sure to regularly update and review your budget so you can adjust values and categories to reflect the evolving nature of your business.
Pros and cons of using Excel for business budgeting
There are plenty of reasons to use Excel for business budgeting, but there are disadvantages to Excel, too.
Excel has historically been a solid starting point for small businesses embarking on their budgeting journey. First-time budgeters often gravitate towards it because:
It’s flexible: Excel allows you to create a budget that fits your specific needs.
It’s familiar: Many people have used Excel at some point in their lives, making it a comfortable place to start for those not ready to venture into new territory.
It’s accessible: Almost everyone knows how to use Excel to some degree, and Excel files can be shared, accessed, and edited on various devices.
It’s (relatively) cost-effective: Excel tends to be affordable and is already available as part of the Microsoft Office suite — although the time it takes to build, adjust, and implement a budget manually leads to increased operational costs.
However, as businesses grow and financial operations become more complex, the limitations of Excel begin to surface, sometimes nudging businesses to explore alternative budgeting solutions. A few noteworthy limitations to Excel include:
Manual errors: Manually inputting data can lead to errors that are hard to fix and can sometimes lead to larger issues down the line.
Inefficiency: Building budgets and updating data in Excel can be time-consuming and labor-intensive, eating up valuable employee time that could be better spent elsewhere.
Scalability issues: As your business grows, manually building and managing your budget in Excel might not be feasible.
Lack of real-time updates: Financial data in Excel isn’t automatically updated, which can lead to decision-making based on outdated information.
Signs it’s time to automate
If you’re noticing a bit of a struggle to keep your budgets in check, pivoting to an automated process could be your next strategic move. Here are some key signs that might indicate it's time to embrace the efficiencies of automation.
Your business is growing
As your business grows, so do your fiscal responsibilities — and a few humans with an Excel spreadsheet can only do so much to keep everything in check. If you’ve found that your business growth has outpaced your ability to keep up with your budget, it’s probably time to automate.
Using a tool like Expensify, which is designed to scale with your business, helps streamline budget management by automating your expense reports and ensuring consistency in data. This, in turn, helps your business grow even more.
You’re missing real-time data
You know what they say — time is money. Having access to real-time data is the key to making informed, timely decisions, and relying on manual data entry can result in outdated information and delayed decision-making.
Expensify offers real-time insights at your fingertips, enabling you to make decisions based on the current financial status of your business so you can confidently steer it in the right direction.
Manual errors are holding you back
Manual data entry is always risky. A slip of the finger, a misplaced decimal, or a misentered digit in Excel can cascade into significant miscalculations, affecting your financial data’s accuracy and reliability.
If you notice that your spreadsheets are prone to error, it might be time to upgrade to an automated system. With Expensify, you minimize opportunities for human error and enhance the accuracy and reliability of your business’s expense management process, making miscalculations a thing of the past.
Reconciliations are eating up valuable time
When manual reconciliations start consuming a chunk of your productive hours, it's a red flag. Laboriously matching transactions and chasing discrepancies in Excel can be significantly optimized with automated platforms like Expensify.
Expensify auto-matches receipts and expenses, saving you from the tedious task of manual reconciliations and freeing up your time for more important tasks (or even a much-deserved long lunch).
Common questions about using Excel for business budgeting
There are a lot of questions that can come up when considering your options for business budgeting. Our FAQs below will help you answer some of them.
What is the easiest way to keep track of a budget?
The easiest way to keep track of a budget is to use automated expense management platforms like Expensify. This is primarily because Expensify alleviates the manual labor of data entry, categorization, and report generation, which are often prone to human error.
Plus, Expensify captures, processes, and archives expense data in real time so your budget always reflects the most up-to-date information. This not only saves time but also ensures that you're working with accurate and reliable data — keeping your budget in great shape, 24/7.
Is Excel good for bookkeeping?
Excel can be good for bookkeeping and accounting depending on the needs of your business.
While Excel is flexible and familiar to many, it may not be the optimal choice, especially as your business grows. The manual input and management of financial data in Excel can become exhausting, and this can lead to costly mistakes.
On the other hand, a platform like Expensify is specifically designed for expense management and bookkeeping, ensuring streamlined, accurate, and efficient handling of all your financial data. With features like automatic expense tracking, integrated accounting software, and real-time data availability, Expensify is the better choice for a growing business.
How does automation improve budget accuracy?
Automation improves budget accuracy by minimizing the risk of human error, which can include data entry mistakes or miscalculations, and by providing real-time financial data that enables more informed decision-making.
Skip the errors and save time with Expensify
Excel is a great place to start — but as a growing business with goals to reach, it shouldn’t be your final stop.
Expensify empowers you to ditch the spreadsheets and embrace automation, propelling your business toward your fiscal goals with newfound zeal and precision. So, what are you waiting for? Drop your info below and automate your budget today.
