So many of the conversations I have with clients and prospective clients revolve around one thing — the many spreadsheets that they use to analyze, format and report on financial data. Too often they act as a bandage to cover up deficiencies in their current financial system.When it comes to using spreadsheets, some typical examples of these shortcomings are the inability to:
Let’s face it. Accountants are completely comfortable with using spreadsheets. They start using them in high school or college, and it beats using old fashioned journal paper.
However, just because spreadsheets are easy to use and work with, it doesn’t mean they are without shortcomings. The more complex the spreadsheet and the formulas within it become, the greater the risk of exposing your company if, for example, someone inadvertently enters a formula incorrectly or forgets to carry the formula down a row of cells.
In many companies, spreadsheets are passed from team member to team member before they finally get to the person they’re supposed to end with. How many of the spreadsheets that you create and work with every day use cell protection? This is a feature inside of Excel that allows you to lock down the formulas in the cell so no changes can be made. The majority of spreadsheets I come across are wide open, meaning that anyone who works on them can edit or make changes to a critical formula, resulting in inaccurate information.
Spreadsheets also depend on the user to create some sort of version control. Typically it is done by including version information in the name. There are no assurances that the version you are looking at is the most recent, up-to-date version. By not having the most up to date version you might be working off old information which can lead to incorrect calculations and erroneous forecasting.
Finally, and most importantly, creating these spreadsheets from underlying financial data is a completely manual process. The data is exported from the finance system into the spreadsheet. If someone makes a change to the underlying data, the only way to include this new data in the spreadsheet is to go through the manual process again, assuming you are aware that changes were made in the first place.
These factors substantially increase the risk of errors and inaccurate information being sent to business leaders. Making decisions based on inaccurate information can put your business at risk. In fact, a study by Ventana Research found that just over one-third (35%) of companies reported discrepancies in their most important spreadsheets.
This study identified three primary areas where better accounting systems can save substantial time: revenue recognition, accounting close, and reporting time and expenses.