Microsoft Excel offers powerful functions that help accountants handle complex calculations that many bookkeeping software packages can’t handle. It isn’t ideal as a primary bookkeeping system, but it works well for filling in gaps, such as reconciliations and specialized computations.
This guide outlines practical ways to use Excel to enhance accounting work and includes templates for bank reconciliation, invoice tracking, bill tracking, loan amortization, and a general ledger. It also explains how you can achieve better efficiency with QuickBooks and helps you decide whether to continue using Excel or upgrade to QuickBooks for more advanced automation.
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Using Excel to reconcile bank accounts
Bank reconciliation helps ensure your book and bank balances match accurately. Discrepancies often occur due to timing differences, so your records and bank statement may not always align. Many accounting software programs include reconciliation tools, but these features are often limited to paid versions.
This template provides a simple way to manually reconcile bank accounts, especially for users of free accounting tools without built-in reconciliation. It lets you match your check register and bank statement by factoring in deposits in transit and outstanding checks for a clear, accurate balance.
To avoid issues with Excel formulas, only fill out the boxes in blue. Before starting, make sure your check register is updated. Then, gather these details:
- Balance per check register
- Bank statement ending balance
- Deposits in transit, and
- Outstanding checks
Deposits in transit are those recorded in your register but not yet on the bank statement, while outstanding checks are recorded in your register but not cleared by the bank. The template automatically compares the adjusted bank balance with the register balance. If the two amounts don’t match, it shows the difference; once balanced, it displays “RECONCILED.”
Upgrading from Excel to QuickBooks Online becomes a smart move once manual bank reconciliation starts taking too much time or creating errors. QBO brings automation, accuracy, and real-time insight that Excel simply can’t match, especially as your business grows and transactions become more complex. You must upgrade when:
- Manual reconciliation in Excel takes too much time or is prone to formula errors.
- Transaction volume grows, and Excel can no longer handle the complexity without missed entries.
- You need real-time financial visibility, not constantly updating spreadsheets.
- Collaboration between bookkeepers, accountants, and business owners becomes difficult with static files.
- You want instant, accurate financial reports without manually building and formatting them.
Using Excel to track unpaid invoices (A/R)
An A/R aging report helps businesses that invoice clients track outstanding payments, showing when each payment is due, how much is owed, and which customer it comes from. It’s a useful tool for forecasting cash flow and knowing your receivables at any time.
This pivot table template makes it easier to track invoices and monitor due dates. However, Excel works best for A/R tracking when you’re managing only a small number of clients. Once you exceed around 30 clients, maintaining accuracy becomes difficult because Excel lacks automation. In that case, using a free invoice generator with automated tracking features is a more efficient option.
After downloading the template, go directly to the CustomerList sheet. Replace all the information in the sheet with your actual customers. Once done, go to the InvoiceData sheet.
Items you can delete and replace with actual data in the InvoiceData sheet:
- Invoice Number
- Invoice Date
- Status
- Company Name
- Invoice Total
The Customer Name and Days Overdue columns cannot be replaced or deleted—these cells contain the formulas. After updating the sheet, go to the Customer Tracker or A/R Aging sheets. Right-click on the table and click Refresh to reflect your changes.
If you’re spending more time chasing unpaid invoices than managing your business, it may be time to move from Excel to QuickBooks Online. Excel can handle basic tracking, but as your client list and invoice volume grow, keeping everything accurate and current becomes harder. QuickBooks Online simplifies this with automated tracking, reminders, and reporting tools that keep your accounts receivable organized and up to date. It’s time to upgrade when:
- Following up on overdue invoices in Excel takes too long or gets overlooked.
- Missing or duplicate entries start causing cash flow issues or customer confusion.
- You need real-time visibility into unpaid balances, aging reports, and customer trends.
- Managing larger volumes of invoices becomes error-prone or overwhelming in spreadsheets.
- Your business requires automation, secure access, and built-in payment and reporting tools.
Using Excel to track unpaid bills (A/P)
Accounts payable (A/P) refers to tracking the money owed to vendors, including when bills are due and when payments are made. Failing to manage these payments on time can lead to poor credit and supply issues. An A/P aging report in Excel helps you monitor outstanding bills, prioritize payments, and identify overdue accounts. This dynamic A/P tracker uses pivot tables, similar to the A/R tracker, allowing you to organize vendors, amounts, and due dates efficiently. With Excel’s filters and sorting tools, managing payables becomes clear and easy to maintain.
I created a dynamic A/P tracker using pivot tables, similar to the A/R tracker. With this setup, you can easily keep track of suppliers and due dates using Excel’s built-in filters and sorting functions, making it straightforward to manage your A/P.
After downloading the template, go directly to the VendorList sheet. Replace all the information in the sheet with actual vendors, then go to the BillData sheet.
Items you can delete and replace with actual data in the BillData sheet:
- Bill Number
- Bill Date
- Status
- Vendor Company Name
- Bill Total
Managing bills, due dates, and vendor payments in Excel can work for a while, but as your business grows, it often turns into a complicated and error-prone process. QuickBooks Online brings structure and automation to your accounts payable system, helping you stay on top of every bill, avoid missed payments, and maintain accurate financial records without constant manual updates. It’s time to upgrade when:
- Handling vendor bills and payment schedules in Excel becomes slow or inconsistent.
- You need automated bill tracking, payment reminders, and recurring entries without complex formulas.
- Multiple users must access and update A/P data in real time from different locations.
- Creating reports like A/P aging or payment summaries takes too much manual effort.
- You require stronger internal controls, audit trails, and compliance features that Excel lacks.
Using Excel to track the cost of goods sold
The biggest challenge in inventory accounting is calculating the cost of inventory remaining at year-end versus the cost of goods sold (COGS) during the year. Tracking COGS is essential for determining net income accurately. This COGS tracker helps you compute the latest COGS balance for each inventory item and assess gross profit or cost per unit.
The calculation of ending inventory and COGS varies depending on whether you use the average cost (AVCO) or first-in, first-out (FIFO) method. This template applies the AVCO method since implementing FIFO in Excel requires complex formulas that can be difficult for many users to manage.
The template above applies the AVCO method for inventory costing. You only need to fill in the yellow cells, and Excel will automatically calculate the rest. Avoid editing the white cells, as they contain formulas that generate specific values. This template is designed for tracking a single inventory item. If you need to manage multiple products, simply duplicate the sheet and rename each one, for example, Sheet 1 as “Light Bulbs.”
If tracking inventory in Excel starts feeling like a constant battle with formulas, version conflicts, or outdated numbers, it may be time to switch to QuickBooks Online. As your product list and sales activity expand, Excel’s manual setup can easily lead to errors and missed insights. QuickBooks Online simplifies inventory management by connecting stock tracking, purchasing, and sales into one automated system that keeps your data accurate and current. You should upgrade when:
- Manual updates and reconciliations in Excel take too long or become prone to errors.
- You need accurate, real-time inventory data for reporting, audits, or compliance.
- Features like automated reordering, valuation, and cost tracking are becoming essential.
- Your inventory must link seamlessly with invoicing, purchasing, and sales records.
- Multiple users need to access and update inventory simultaneously without version issues.
Using Excel to create amortization schedules
A loan amortization schedule outlines each payment, showing how much goes toward interest and how much reduces the principal balance. It’s a helpful tool for recording monthly interest expenses and updating loans payable in your books, especially since most accounting software doesn’t include a built-in amortization feature.
This template is designed to help you compare and analyze loan options before borrowing. By adjusting the principal, interest rate, and loan term, you can see the total interest cost and understand the full financial impact of your loan decisions.
The template is a dynamic amortization table that adjusts based on the number of payment periods and terms. All you need to do is fill out the yellow cells, and Excel will generate the table automatically. Take note that the maximum loan term in this template is 40 years.
The amortization table contains the following information:
- Period is the ordinal number corresponding to the number of payment periods. For example, period 1 pertains to the first payment, while period 6 pertains to the sixth payment.
- Date refers to the date when payment is due.
- Beginning Balance is the loan balance at the beginning of the payment period.
- Payments is the installment payments you need to make based on the payment frequency. If you choose a payment frequency, this cell changes dynamically.
- Interest is the amount of interest expense based on the beginning balance of the loan.
- Principal Amortization is the portion of installment payments deducted from the loan’s beginning balance.
- Ending Balance is the loan balance after deducting the principal amortization.
As a CPA, I recommend using Excel to create loan amortization schedules because it can handle complex formulas that QuickBooks Online doesn’t support. Excel lets you accurately calculate principal, interest, and payment breakdowns, giving you full control over your amortization model. However, once the schedule is complete, QuickBooks Online becomes essential for recording payments, tracking loan balances, and automating journal entries to keep your books organized and compliant.
Using Excel as a general journal & general ledger
The general journal (GJ) and general ledger (GL) are the two most important records in accounting. All transactions in a business are recorded in the GJ and summarized in the GL. Without these two books, it’s almost impossible to have an organized accounting system.
I recommend using this template if you don’t need to keep detailed records of transactions. It will enable you to keep tabs on all accounts related to your business. If you don’t have accounting knowledge, you’ll have a hard time using this template, so ask someone with accounting experience to use this sheet for tracking your accounts.
Instructions on how to manipulate the template are included in the Excel file. Download it, and read the instructions carefully.
As your accounting needs grow, managing the general ledger in Excel can quickly become inefficient and risky. Experts recommend upgrading to QuickBooks Online once accuracy, automation, and auditability become priorities. QuickBooks simplifies general ledger management by automating journal entries, maintaining audit trails, and keeping reports up to date. It’s best to upgrade when:
- Manual posting and reconciliation in Excel take too much time or lead to recurring errors.
- You need audit trails, access control, and compliance tracking for better accountability.
- Reporting demands increase, and building financial statements manually becomes impractical.
- Multiple users must collaborate on the general ledger without version conflicts.
- Data accuracy, transparency, and security can no longer be guaranteed through Excel alone.
Advantages and limitations of using Excel for accounting
Excel was originally modeled after traditional accounting ledgers, which explains its grid of rows and columns that feel natural to accountants. Over time, it evolved into a flexible tool used in many fields beyond finance. Its formulas, charts, and data visualization tools make it valuable for organizing and analyzing complex information. Still, as dedicated accounting software continues to advance, it’s worth examining whether Excel remains the stronger choice for managing financial data.
Here’s a closer look at its main strengths and limitations.
| ADVANTAGES | DISADVANTAGES |
|---|---|
| Data visualization: Excel remains a powerful tool for basic to intermediate data visualization. Its ability to generate charts can help accountants quickly visualize financial information. | Prone to human error: Excel can’t automatically spot errors unless you add a function or macro that spots errors. |
| Formulas and functions: With built-in formulas, functions, and pivot tables, Excel enables complex calculations and data analysis, essential for budgeting, forecasting, and financial modeling. | Limited automations: Adding macros in Excel can automate things for you, but it can’t compete with advanced automation features found in accounting software. |
| Popularity and widespread use: Schools include Excel in basic computer courses, making it a tool familiar to almost everyone. Accounting courses also include Excel in the curriculum since Excel remains an accountant’s primary tool for data analysis. | Security: Though Excel files can be password-protected, they may be prone to unauthorized access and accidental deletion or modification of data. |
Overall, Excel is still great for accounting—but only to some extent. If you’re a freelancer wanting to track income and expenses, Excel is like a Swiss army knife. Within Excel, you can even manage projects that can connect with your invoice tracking.
When to use bookkeeping software
As your business grows, Excel may no longer keep up with your bookkeeping needs. It’s a great tool for organizing data, but bookkeeping software brings automation, accuracy, and real-time visibility that save time and reduce errors.
You should consider switching to bookkeeping software when:
- Your transaction volume increases. Automated data entry, expense categorization, and bank reconciliation save hours compared to manual Excel tracking.
- You need regular financial reports. Software can instantly produce profit and loss statements, balance sheets, and cash flow reports without complex formulas.
- You rely on multiple business tools. Bookkeeping systems integrate with payroll, inventory, and CRM apps, keeping all financial data synchronized.
Check out our list of the best small business accounting software options.
Frequently asked questions (FAQs)
Yes, but it’s not recommended. Excel is cost-effective for very small businesses. However, it can be counterproductive and difficult to use for small businesses with complex processes. I recommend getting one of the best small business accounting software instead.
Accountants and bookkeeping professionals use Excel to perform complex calculations, like amortization tables and depreciation schedules. They also use it to compute product cost, allocate overhead, and perform budgeting and forecasting.
Overall, yes, QuickBooks is better than Excel for accounting. QuickBooks is also easier to use because you don’t need to create formulas to perform calculations and process data. Excel requires users to have in-depth knowledge of formulas and even a little bit of programming to create automations.
Accountants need technical skills in Excel. They must know all Excel functions and features to maximize the software’s potential. It would be a big plus if they knew the keyboard shortcuts.
In accounting, functions like VLOOKUP, HLOOKUP, or INDEX-MATCH (now replaced by XLOOKUP) are extremely useful for accountants, especially when getting values from different tables. However, logical functions like IF, IFS, SUMIFS, or COUNTIFS enable accountants to execute conditional statements that are very useful for filtering data.
