Initially, spreadsheets were designed as computerized simulations of traditional paper accounting worksheets. While in some cases spreadsheets still serve a purpose, this old school financial management strategy can lead to inefficiencies and errors that will eventually have a major impact on the business’ value. Following are 5 reasons why spreadsheets will ruin your business and how to avoid it.
- Keeping Financial Data Up to Date
If you use spreadsheets, you need to consider who controls the master to know which version of the file is up-to-date. What happens if several people need to use it at the same time? With spreadsheets, you need to email what you think is the most recent version to and from recipients which opens the door to errors. With good accounting software, approved individuals can sign in between devices online. This is one of the most beneficial differences because you’ll always know that the numbers you’re seeing are current.
- Errors Go Unnoticed
Meticulously reviewing spreadsheets and looking for errors is an undertaking that no one enjoys doing, meaning that errors are certain to slip past undetected. Studies have shown that errors have even slipped by professional auditors whose main function is to comb through them to identify errors in formulas and data.
- Time Consuming
Spreadsheets are time-consuming and put businesses at a considerable disadvantage. Spreadsheets slow down processes and have a noticeable impact on how long it takes to get work done. A significant amount of time is spent consolidating, correcting and modifying spreadsheets. And when used in collaborative, repetitive business processes, they become huge time wasters. Closing the books more efficiently and faster is a perennial objective, which is why successful businesses are moving away from using spreadsheets.
- Unsuitable for Adaptive Business Practices
Spreadsheets are typically created by people who have little knowledge when it comes to the software’s functionality. Ultimately, their spreadsheet files turn into highly personalized applications. What this means is that when someone else takes over during a large scale business change, the new person put in charge might have to start over again from scratch. We live in an age when significant changes are consistently transforming the business landscape. Acquisitions, mergers, new technologies, and management buyouts can have an effect on today’s companies. If an organization doesn’t have adaptive business practices in place, it could easily be left behind or worse, face extinction.
- Fraud Vulnerability
Of the previous spreadsheet drawbacks listed here, this one has the potential of being one of the most damaging. Fraudulent manipulations in company spreadsheet files have resulted in billion dollar losses. The primary reason behind this vulnerability is the lack of controls, which makes it easy to modify values and formulas without being detected.
Spreadsheets vs. Accounting Apps
Accounting applications are the best solution for businesses because they are built to make it possible to record your accounting data efficiently with minimal mistakes. They are also more easily audited. Although they are created for the specific purpose of accounting, they include contact management as well. Spreadsheets, on the other hand, leave too much room for error and are much more time-consuming.
Spreadsheets vs. Bookkeepers
Many new business owners spend more time and money than they save when they attempt to do their bookkeeping themselves. According to the Small Business Administration, not having a bookkeeping system in place and bad bookkeeping are the top reasons why many new businesses are unsuccessful. Also, as a business expands, it outgrows simple financial tracking solutions, and the bookkeeping gets more complicated, making it essential to hire a bookkeeper.
Although spreadsheets can be helpful at times, they can also ruin your business. That’s why it is important to consider using accounting software and a reputable bookkeeper for your business. Contact us today!