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Most UK SMEs run finance and planning on spreadsheets or entry-level ledgers like Xero, QuickBooks, or Sage 50. For straightforward operations, that’s a rational choice. But growth has exposed limits that affect close speed, audit readiness, and confident decision making.
Almost 60% of SMEs rely on spreadsheets, yet only 48% of small business owners say they’re confident they’re paying taxes correctly (even as 91% rate accountancy as integral to operations). That gap between importance and certainty is where risk creeps in.
This guide takes an accounting-first view to help you decide whether to double down on spreadsheets and small ledgers or move to an ERP finance core. You’ll see where spreadsheets still win, where they break under scale, and the risks of delaying change. Ending with a simple decision framework (Stay, Optimise, or Move) so you can progress with confidence.
When Staying Put Makes Sense (For Now)
When the operating model is simple (think single entity, modest product or service complexity, straightforward revenue recognition), the combination of a small‑business ledger plus spreadsheets can be the fastest and cheapest way to manage finance. Here’s why:
- Low total cost and rapid iteration: Spreadsheets and small‑business ledgers are flexible and inexpensive. Teams can prototype models, adjust reports, and answer ad hoc questions without waiting for IT.
- Familiar tools and hiring benefits: Most new hires know Excel or Google Sheets and common SME ledgers, which reduces training time and lets you standardise templates quickly.
- Fit for simple operations: For a single entity that is domestic with modest product or service complexity, core accounts payable (AP), accounts receivable (AR), bank feeds, and VAT returns may cover needs. Add‑ons for expenses, payroll, and credit control can extend capability without a platform overhaul.
- Fast time to value for small asks: If the board needs a new metric next week, a spreadsheet model or a lightweight business intelligence (BI) connector can deliver quickly, especially while requirements are still evolving.
Where Spreadsheets and Entry‑Level Accounting Tools Struggle
Scale exposes fragility. In terms of financial management, scaling can expose issues related to:
- Version control and auditability: Emailing workbooks, manual consolidations, and hidden formulas increase the risk of errors and weaken the audit trail (just look at JPMorgan’s $6 billion mistake!)
- Multi‑entity and multi‑currency complexity: Intercompany eliminations, foreign exchange translation, and partial ownership accounting are possible in spreadsheets, but fragile and time‑consuming (keep in mind, month‑end cycles lengthen as you scale to two to ten entities).
- Operational blind spots: Basic ledgers do not natively integrate orders, inventory, projects, and procurement. The result is siloed data, delayed work in progress (WIP) visibility, and avoidable stockouts or over‑purchasing.
- Compliance friction: Making Tax Digital (MTD) digital links, U.K. GAAP or IFRS revenue recognition, and document retention all require a tighter control environment than spreadsheet chains typically provide.
- Reporting bottlenecks: As channels and products grow, stakeholders ask more “why” and “what if” questions. Manual data preparation becomes the bottleneck rather than the analysis.
What ERP Delivers for Finance and Accounting
A modern ERP unifies the general ledger, AP, AR, fixed assets, VAT and cash management with orders, inventory, procurement, and, where relevant, projects and manufacturing.
Transactions post once and flow through the model, giving finance a single source of operational and financial truth. This promotes:
- Faster, more reliable close: Automated accruals, bank‑reconciliation rules, subledger ties, and built‑in intercompany processing reduce manual work. Many SMEs materially reduce close time after moving to ERP.
- Consolidation and controls by design: Multi‑entity, multi‑currency, eliminations, and role‑based approvals are native. Segregation of duties and audit trails are enforced in the system rather than in policy documents.
- Real‑time operational visibility: Finance sees unbilled orders, landed cost, WIP, and stock positions without waiting for uploads, which improves margin and cash forecasting.
- Compliance built in: Support for HMRC MTD, digital links, and document retention is standard. You also gain consistent revenue recognition and audit‑ready evidence of who approved what and when.
- Extensible analytics: With finance and operations data in one model, self‑serve dashboards answer “why” quickly, such as product margin by channel, aged‑inventory risk, and supplier performance.
Risks and Growth Blockers If You Delay Switching
Postponing improvement of your financial operations doesn’t keep things steady. Instead, it quietly slows growth and raises risk, quarter after quarter. The longer finance relies on manual consolidation and patchwork exports, the slower decisions become. Hours spent reconciling spreadsheets are hours not spent analysing margin, so price changes and supplier renegotiations slip.
Risk also concentrates in a handful of people. Critical logic hides inside complex workbooks that only a few colleagues truly understand. A departure, illness, or even annual leave can stall month-end and disrupt operations.
Cash begins to leak, often invisibly. Weak credit controls and late dispute identification push up days sales outstanding (DSO). Manual AP approvals miss early-payment discounts and let invoices age beyond agreed terms.
Errors and fraud find the gaps. Copy-paste routines and weak approval workflows create openings for duplicate payments, misclassifications, and supplier manipulation. Each exception takes time to detect and even longer to unwind.
Then comes the integration tax. Every CSV shuffled between finance, inventory, e-commerce, and CRM adds delay and erodes data accuracy. Small mismatches compound into forecasting misses, compliance headaches, and awkward auditor conversations.
A Typical ERP Implementation Path for SMEs
Most SMEs succeed with a phased approach. Phase one establishes the finance core: standardise the chart of accounts, suppliers and customers, open AR/AP, VAT, and bank reconciliation.
Phase two adds procurement, inventory, and order management, where the business case is strongest (typically where landed‑cost accuracy, WIP visibility, or fulfilment reliability are currently weak).
Teams then move open items, historical balances, and only the subledger detail required for reporting and audit continuity, resisting the urge to “boil the ocean” with full transactional history.
Training should focus first on approvals, the close checklist, and the reporting pack your board uses.
Generative and Agentic AI: What’s Real Now For Accounting?
Modern ERP systems have opened the door to AI integration with great success, offering Generative and Agentic AI solutions.
Generative AI speeds up narrative reporting, draft policy creation, and ad hoc queries like “show me purchase orders over £10,000 awaiting approval”. Agentic AI (or supervised autonomous agents) goes further by carrying out multi‑step finance work and logging each action for audit.
The early wins are clear.
In AP, agents extract and code invoices, validate against purchase orders, and route exceptions. In AR, they drive prioritised dunning and dispute triage based on payer behaviour. For the close, bots orchestrate checklists, chase task owners, attach evidence, and flag reconciliation breaks.
It’s important to understand that guardrails are essential here. These include role‑based permissions, human‑in‑the‑loop approvals for postings, and robust audit logs. A beginning point would be to start with one workflow, measure cycle time and exceptions, then expand to adjacent processes.
Decision: Stay, Optimise, or Move
The right answer is not “ERP for ERP’s sake”. It is about enabling finance to be faster, safer, and more insightful. If spreadsheets and a small ledger deliver that today, keep them. If growth has turned them into a bottleneck, consider an ERP finance core, with GenAI and agentic automations layered in, to run a tighter, more scalable close and to unlock better decisions.
Here’s a simpler framework to help you decide:
- Stay and optimise when you are a single entity, domestic, have low stock‑keeping unit complexity, and can close within a few days using stable, well‑documented spreadsheets. Invest in tighter controls, versioning, and a lightweight BI layer.
- Prepare to move when you have two to ten entities, FX exposure, inventory or projects driving revenue, and a close that relies on manual consolidations. Pilot AP and AR automation to quantify time saved and to build the business case.
- Move to ERP now when compliance or audit issues are recurring, stakeholders lack timely insight, or integration pain is blocking growth, for example, launching a new channel or warehouse.
About Comparesoft
Comparesoft is an AI-powered software matching platform trusted by over 3,000 UK businesses.
Also read: The Future of ERP Consultants for Small Businesses: Discussing Emerging Trends and Advancements
Sources:
https://quickbooks.intuit.com/r/small-business-data/accounting-day-survey-2022
https://qz.com/119578/damn-you-excel-spreadsheets-jp-morgan-edition
https://www.corporatevision-news.com/is-it-time-your-business-moved-away-from-spreadsheets
Image source: Freepik.com
