Spreadsheets have historically been the go-to for tracking data of all kinds, and while these spreadsheets can hold a large amount of useful information with calculating and sorting capabilities, they come with their own limitations.
Companies that use spreadsheets for financial activities find that with changing standards, growing work complexities and increasing amount of calculations, their spreadsheets become less of an asset and more of a liability.
Static, error-prone, and limited in scope of function, spreadsheets can be obstacles that create significant risks for the companies that use them by eroding accuracy, restraining productivity and preventing compliance.
Modern businesses that are service-based, facing the pains of rapid growth, or growing within a multi-entity or currency structure cannot afford to work within the confines of static spreadsheets for their financial processes. According to Ventana Research, one-third (35%) of companies find data errors in the spreadsheets they use for their most important data.
However, in response to the looming risk, when companies replace spreadsheets with a specialized software for financial functions, they discover improved efficiency, regulation compliance and data accuracy, saving these companies time, and improving their scalability in three major ways.
Revenue Recognition Compliance
Starting in 2018, the Financial Accounting Standards Board, or FASB, and the International Accounting Standards Board (IFRS), are fundamentally modifying the accounting for contract revenue, to create changes in US-GAAP and IFRS compliance requirements.
This can mean an increased workload, and a potentially significant risk of errors and miscalculations for companies still operating under the use of spreadsheets for their revenue recognition processes. Spreadsheets do not offer audit trails for contract changes, nor can they easily keep track of changes in contract attributes, such as payments, status, billing, or dates.
Research indicates that significant spreadsheet use can cost a company two to three days of maintenance each month to ensure their accuracy. For fast-growing companies - especially those with complex financials - this kind of hold up can inhibit scalability and cause administrative labor and expenses to spiral out of control, especially in light of new changes coming on board in 2018.
More Efficient Closing Practices
When it comes to consolidation or monthly closing practices, Ventana’s research shows that 53% of midsize companies use spreadsheets for their consolidation, and companies that use spreadsheets for consolidation find it takes them a greater amount of time for monthly or quarterly closes than those that use an ERP or dedicated consolidation system.
When companies use a system designed to handle complex calculations and consolidations automatically, they can generate their reports more quickly, make modifications and corrections with greater accuracy and speed, and can move onto other critical tasks, in the time saved from process automation.
Streamlined Time and Expense Activities
For businesses that offer services as a product, calculating time and expenses makes up a large part of their financial processes. Many of these businesses have come to rely on spreadsheets and their endless pivot tables to manage their project details for allocation and analysis.
From employees tracking their various project time and expense details, to the accounting teams that must sort and process it, to the clients who need detailed breakdowns of the fees on their invoices, when spreadsheets are managing that kind of data, the process can be an exercise in frustration for everyone involved.
Professional services companies are best equipped when they are running their financial processes from an expert ERP solution, like Intacct, uniquely designed to automatically sort and calculate complex data whether time or expense needs to be billed, taxed, itemized or tracked.
Because spreadsheets may be an alluring option, companies tempted by their easy set-up and popularity need to see past their limited value to weigh the benefits that come from moving beyond them. When forward-thinking businesses see that they can consolidate in a shorter amount of time, stay on top of revenue recognition compliance modifications quickly and easily, and make complex time and expense management a simple process, the decision becomes clear.
Our team of experts at BAASS can help you find the right fit for your unique financials. Contact us to streamline your financials and support your team to maintain your scalability and support your company’s growth.
