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Spreadsheets vs. Accounting Software? No Contest!

Beware the Spreadsheet Junkie

Isn’t it funny how some trivial incidents, from years gone by, can stick in your mind?

Even though it was 20-odd years ago, I'll never forget it – the day I stumbled on a workmate trying to use Microsoft Excel to write a letter.

After we’d had a good old laugh about it (me more than him), I questioned the reason for such madness. His answer: “Excel is great - you can do almost anything with it”.

A confident answer but we both knew that even Microsoft would have laughed themselves silly at such use of Excel.

Of course it didn’t take him long to see the error of his ways, once I’d persuaded him to open up Microsoft Word and given him 10 minutes on the basics.

Fast-forward 20 years and whilst I haven’t encountered anyone since trying to use Excel as a word-processing tool, I’ve seen many more, equally-ridiculous, examples of its misuse.

It’s a love-hate thing

Let me be clear, I love spreadsheets. I think they’re great for individual analysis and have good data manipulation features.

But I also loathe spreadsheets – mainly because hardly a week goes by without me seeing someone misusing – even abusing - them. And oftentimes, it’s the very people who should know better, i.e. those who actually know how to use them properly (just like my old work pal).

And whilst I’m not one of those that believes familiarity should necessarily breed contempt, when it comes to how spreadsheets are used, I’d at least expect familiarity to yield good judgement.

Unfortunately not; and with one of the most common misuses being bookkeeping functions that accounting software does so much better.

A spreadsheet doth not an accounting system make

No matter how skilled the ‘maker’, spreadsheets just don’t have the capabilities to be used as a pseudo-accounting system. Sure, some people will disagree – primarily those who have poured hours into devising a complex spreadsheet model that they claim can do everything accounting software does.

But they’re just plain wrong - and that’s even before stating the requirement properly – that the spreadsheet needs to do everything as well as accounting software does it.

You see, it’s one thing to attempt basic accounting using a spreadsheet, but it’s another thing entirely to do it easily and accurately!

Here’s why spreadsheets simply can’t compete with proper accounting software like Xero:

Accuracy: spreadsheets are notorious breeding grounds for data inaccuracies because most users lack the skills or dedication to build in proper controls. A wrong keystroke and an important formula is overwritten, making the calculation meaningless.

Consistency: Ensuring data consistency within a single spreadsheet is difficult enough but maintaining consistency across spreadsheets is nigh-impossible. Without a whole library of business rules and conditional formatting, it’s just too easy for discrepancies to creep in.

Versioning: Ensuring that everyone is always using the correct version of a spreadsheet requires a lot of unnecessary effort. And even with such rigorous controls in place, it only takes one individual to forget or ignore the rules to start using an old version.

Collaboration: Whilst many financial processes require good collaboration, spreadsheets are simply not conducive to supporting a shared environment. This means that information sharing becomes a ridiculous game of email back-and-forth with multiple versions of the same file being updated simultaneously.

Scalability: spreadsheets are only really intended to be used by one individual at a time - and doing analysis-type work. But as the business evolves, more data is added and additional people need access, their inability to scale becomes more of problem.

Visibility: most organisations typically have multiple spreadsheets in play trying to support their various bookkeeping functions. This means that it is often necessary to look at more than one file to get the complete picture and keeping everything in synch requires unnecessary overheads.

Auditability: spreadsheets don’t support traceability and audit-trails because once a cell is overwritten, any prior history is immediately wiped.

Process: spreadsheets have no workflow capability so managing the various accounting processes needs to be done separately – and is therefore usually done manually using email. Talk about inefficient!

Security: ever had a spreadsheet become corrupt – or even go missing? What about a PC breaking or getting stolen? Unfortunately these type of things happen all the time and when they do, you’re probably going to regret your over-reliance on spreadsheets.

The bottom line

Trying to get a spreadsheet to perform to the same standard as accounting software is an unfair contest. Even if it’s well-constructed, it’ll be both ineffective and inefficient. The result will be a whole load of wasted effort – and therefore avoidable cost – trying to perform tasks, fixing up mistakes and maintaining the spreadsheet.

Seriously, why would you even attempt to reinvent the wheel? You’ll end up with something that’s only fit for use on Fred Flinstone’s car.

#Spreadsheets #AccountingSoftware #MicrosoftExcel