Using spreadsheets to manage your company’s finances has benefits in certain circumstances – say, if you need to store small datasets or conduct ad-hoc analysis. However, those systems aren’t designed to handle the complex financial tasks that can arise in business. In fact, relying entirely on spreadsheets can have a more damaging impact than you realise.
The Dangers You Face
Balancing your company’s budget using spreadsheets presents four distinct problems:
- Unnoticed Errors: In 2012, banking giant JP Morgan recorded a $6 billion trading loss, due in part to unnoticed errors that occurred during the manual input of data into Excel. These errors became more pronounced during mass ‘copy and paste’ migrations from one spreadsheet to another. If this kind of damage can happen to one of Wall Street’s biggest operators, it can most certainly happen to you
- Time-wasting: Using spreadsheets for more complex financial processes can become a major time-suck – not just through establishing formulae and entering data, but also consolidating and correcting the aforementioned errors. This can make spreadsheets a drain on your limited resources
- Inconsistent Datasets: Having multiple versions of the same spreadsheet data in the business can create a disparity of accurate financial information between each file, which can worsen the less they are controlled. These ‘duelling spreadsheets’ might be easily reconcilable. However, if they progress beyond a manageable point, your business will waste valuable resources auditing and rectifying the issue
- Issues with Control: Spreadsheets offer users the freedom to create solutions that solve business problems. However, financial data needs strict control in order to maintain its accuracy. With multiple spreadsheet versions and users, it becomes imperative to merge to a single, protected data source to avoid spiralling into spreadsheet chaos
Solving the Spreadsheet’s Drawbacks
Spreadsheets will always have a place in every company. They remain valuable assets for business tasks, such as auditing and formatting, and can present information in easily digestible graphs and charts. However, your business may suffer the aforementioned consequences without centralised and streamlined financial management software, such as QuickBooks Online.
These software platforms can be superior to spreadsheets in some respects:
- Simply and quickly produce profit and loss reports
- Ensures your staff are paid the correct amount, while all PAYG withholding tax and superannuation payments are accurate
- Automatically creates payment summaries, meaning you no longer have to handwrite ATO submissions
- Offers extra features that spreadsheets can’t, such as invoicing, inventory management and pay slips
- Provides real-time data feedback to give you a clearer picture of the financial health of your business
Accounting can become a nightmare for small businesses, especially around EOFY, and spreadsheets might cause you headaches if they’re out of date or full of errors. Upgrading to quality software can save you from unnecessary troubles down the road.