Microsoft launched Excel back in 1985. When you compare technology back then to the software of today, the difference is stark — yet many organizations cling to the comfort of those pixelated rows and columns, despite the abundance of more appealing alternatives. It might seem like a harmless preference, but giving up spreadsheets could save you some serious money.
Unfortunately, your trusted friend Excel is holding you back from keeping an accurate record of your finances and making it harder for you to scale your operations. Here’s why — and what you should do instead.
The problem with spreadsheets
When measuring how well your business processes function, there are two primary indicators: Efficiency (ability to achieve an outcome with minimal time and resources) and effectiveness (ability to do something well). Spreadsheets fail on both of these grounds.
They’re ineffective because they often contain reporting errors. Yet they’re also inefficient since the results spreadsheet yield doesn’t justify the time spent creating and maintaining them — they’re not a useful tool for scaling a business or improving processes.
Let’s look at both points in further detail.
According to some studies, as many as 88% of spreadsheets contain human errors. This might not be a big deal for individuals who use them to track their weekly budget, but it can result in significant knock-on effects for companies. Accidentally entering an extra zero in one cell can mess up a whole string of subsequent formulas, which could mess up an entire supply chain or hide the need to cut spending to prevent disaster.
In fact, JP Morgan’s $6 billion trading loss in 2012 was partly due to errors in Excel.
You might think the solution is simply to “be more careful,” but this isn’t easy if you have multiple people using the same Excel sheet. One person may falsely assume their colleague has or hasn’t added certain information, and there are no features to facilitate cooperation or show the latest updates.
Efficiency is all about using the smallest amount of input to produce the maximum output, and spreadsheets couldn’t be much further from achieving this goal. There’s a huge learning curve to get to grips with all the formulas and complex tools involved — and even once you’ve mastered them, the potential payoff from Excel pales in comparison to newer software.
Using a tool designed for a specific purpose (like project management or accounting) means the software will have ready-made features to track and optimize metrics relevant to your goals. Plus, they can also directly connect to relevant software so you don’t have to do everything manually. All this saves time and produces results.
Companies these days like to rave about the merits of Agile methodology, but they seem to forget that their spreadsheets aren’t compatible with the core principles.
Spreadsheets also cause massive issues when onboarding new people. Your team might have a personal preference for the spreadsheets they’ve designed themselves and feel happy with using them, but is it worth the time and effort of training every subsequent joiner when you could simply use a more intuitive system?
What to do instead
Instead of relying on Excel, train your team on how to budget properly and understand the business's financial health. Then, create a formal accounting system using more appropriate software.
The learning curve might seem steep, but more modern tools should make life easier for everyone on the team. Something as simple as QuickBooks or Xero can connect with your bank accounts and cards automatically, removing the need for someone to add every transaction manually. Plus, many platforms have features that facilitate collaboration using the cloud, highlight real-time updates, and even use AI to offer suggestions and point out potential errors.
It might sound daunting to make the switch, but you don’t have to do it alone. You could also consider hiring a third party to train your team in using new software, which reduces the risk of them continuing to use Excel on the down-low.
Plus, a consultant can look at your current operations to understand how your accounting system currently works and identify areas for improvement. It may not just be a new technology you need, but also a shift-up in who does what and when.
Time to wave goodbye
Breakups can be painful, but we go through with them when we know they’re not serving us anymore. The same thing applies to your business and spreadsheets.
If you’ve accepted it’s time for a change, it’s time to put that into action. At Cornerstone Paradigm Consulting, we can help you to move away from spreadsheets toward a more efficient and effective solution. To find out more, book a consultation today.
About the author:
Cornerstone Paradigm Consulting, LLC is an industry-agnostic global business operations consulting firm, that goes beyond the symptoms to get to the root cause of your business issues.