Accounting Software vs Excel for Hong Kong Bookkeeping

At a glance

Both can satisfy the record-keeping requirements of section 51C of the Inland Revenue Ordinance and the Companies Ordinance. What matters is whether the records are sufficient, complete and retrievable.

What Excel can carry

Do not be talked out of it — plenty of small companies use Excel and use it well.

The typical situation it handles:

• A few to a few dozen transactions a month
• No stock (services, consultancy, agency work)
• One person entering everything
• No multiple currencies
• The owner can read the books themselves

In that situation, a well-structured spreadsheet plus systematic filing of source documents is entirely enough, and it saves the software fee.

If you do use Excel, the minimum is three things: a date, an amount and a reference to the source document for every entry; income and expenditure on separate sheets; and a reconciliation against the bank statement every month.

Five signals it is time to switch

Two of these showing up usually means the moment has come.

One: you have started carrying stock. Tracking stock in Excel goes wrong almost by default — purchases, sales, returns, shrinkage. A few months in, the book quantity and the actual quantity no longer agree.

Two: you have hired someone to do the entries. The moment more than one person opens the same file, you have a “which version is current” problem. And with no access controls, anyone can change any cell.

Three: you need to chase who has not paid. Once receivables build up, Excel relies on someone remembering to follow up. Software prompts automatically and produces statements.

Four: monthly reconciliation takes you more than two hours. This is the most practical threshold — software imports bank records and matches them automatically, and the time saved quickly outweighs the fee.

Five: someone is asking you for reports. A bank loan application, investor due diligence, or financial information required when opening an account — software produces reports ready to use, whereas Excel means preparing them separately.

The real danger in Excel is not the features — it is that edits leave no trace

This deserves its own section.

Once a cell in Excel has been changed, it has been changed. Nobody knows what it was, when it changed, or who changed it.

What that means in practice:

• The figures do not agree at the year end, and you cannot trace which step was wrong
• The auditor asks you to explain an adjustment and you cannot
• The IRD asks a question and you have no traceable chain of records to produce

The audit trail in accounting software — who changed what, and when — exists precisely for this. It is not a convenience; it is credibility.

A middle path: if you are staying with Excel, save a read-only copy each month once the month is closed, and never overwrite it. That at least gives you monthly snapshots.

What to look for in software

Never mind which brand is best known. Look at four things:

One: does it support Hong Kong dollars and the currencies you actually use? If you trade cross-border, look at how it handles multiple currencies.

Two: can it import records from your bank? This is where the time saving comes from. Confirm it before you buy.

Three: will your accountant accept its export format? This is the one most people miss — ask your accountant or auditor before choosing whether they accept exports from that package. If not, they will re-enter everything and your saving disappears.

Four: can you take the books with you when you leave? If you want to switch one day, can the data be exported in full? That is a question to ask before buying, not after.

As for “AI receipt recognition” and similar features — how much time they actually save depends a great deal on the quality of your documents and the type of transactions. Worth trying, but not a reason on its own to switch.

The three places switching most often goes wrong

One: the opening balances are entered wrong. Moving from Excel to software, the opening bank balance, receivables, payables and stock quantities all have to be exactly right. Get this step wrong and everything after it is wrong. Choose the year end date as the switchover point — then the opening balances are audited figures.

Two: the old data is not kept. Switching to new software does not mean the old spreadsheets can be deleted — the seven-year retention requirement still applies.

Three: running both for too long. Some people “try it out first” and run Excel and the software in parallel, and end up with neither being complete. If you are switching, set a date and cut over entirely.

In the end, the tool is not the point

Excel reconciled on time every month beats the most expensive software opened once a quarter.

What actually decides whether the books are right is frequency and discipline — see doing the books once a year versus monthly. The tool only makes the discipline a little easier to keep.

And if what you find is that you keep putting the bookkeeping off, changing software will mostly not solve it; handing the work to someone else may be more direct.

Want someone to look at your transaction volume and say which approach fits, and to work through the opening balances for a switchover? Talk to us.

This is general information and does not constitute accounting or software procurement advice. The statutory record-keeping requirements are as set out in the Inland Revenue Ordinance and the Companies Ordinance and most recently published by the IRD.