Finance teams often think of spreadsheets as a quick and easy way to do simple calculations or organise data. They use them for things like budgeting, forecasting, and tracking expenses.
However, while spreadsheets may seem like a cost-effective solution, there are hidden costs that can quickly add up.
Here are some of the hidden costs of using spreadsheets:
1. Time spent on data entry and validation
One of the biggest problems with using spreadsheets is the amount of time it can take to enter and validate data. This is especially true if you are working with a lot of data from different sources.
This spreadsheet drawback alone can be a huge hidden cost, as it can take away from time that could be spent on more productive tasks.
Spreadsheets are also prone to errors, both in the data that is entered into them and in the formulas used to calculate results.
Even a small error can have a big impact on the results of your analysis. And if you’re sharing your spreadsheet with others, those errors can propagate and cause even more problems.
3. Difficult to share and collaborate
It can be difficult to share and collaborate on spreadsheets, especially if you are working with a team.
This is because each person needs to have their own copy of the spreadsheet in order to make changes, and those changes need to be manually merged into the master spreadsheet.
This can lead to a lot of confusion and wasted time trying to keep everyone on the same page.
4. Limited data analysis capabilities
Another hidden cost of using spreadsheets is the limited data analysis capabilities.
This is even more true if you need to use data from multiple sources, as you will need to do a lot of manual work in order to get the data into the correct format.
5. Difficulty integrating with other systems
If you need to share data with another team or department, it can be very difficult to do so without a lot of manual work.
6. Not scalable
As your business grows, the number of transactions and data points you need to track will also grow.
This can quickly overwhelm a spreadsheet, making it difficult to keep track of everything.
7. Difficulty auditing
If you need to audit your spreadsheet data, it can be very difficult and time-consuming to do so. This is because you need to go through each cell manually to check for accuracy.
In today’s business environment, data accuracy and speed must go hand in hand in order for your organisation to maintain a competitive advantage.
8. Version control issues
If you are working on a spreadsheet with other people, it can be difficult to keep track of who is working on which version.
This can lead to confusion and wasted time when someone accidentally overwrites another person’s work.
9. Difficulty tracking changes
How do you track the changes that have been made to a spreadsheet over time?
It can be very difficult, especially if there are multiple people working on the same spreadsheet.
10. No real-time data
Another hidden cost of using spreadsheets is that you cannot get real-time data
This can be a big problem if you need to make decisions quickly, as you will not have the most up-to-date information.
11. Can’t handle complex financial rules
If you have complex financial rules, such as accruals or allocations, spreadsheets can quickly become unmanageable. This is because you need to create separate sheets for each type of rule and then link them all together.
This can lead to errors and make it very difficult to keep track of everything.
12. Security risks
Spreadsheets are often stored on computers or servers that are not secure. Storing sensitive data in a spreadsheet, there is a risk that it could be accessed by unauthorised users.
You also need to be careful when sharing spreadsheets, as they could be forwarded to someone who should not have access to the data.
13. Limited or zero automation
Carrying out data entry and other manual tasks can be very time-consuming.
If you are using a spreadsheet, there is no way to automate these tasks, which can lead to inefficiencies in your workflow.
14. They’re just not that flexible
Spreadsheets are just not that flexible. You are limited by the number of columns and rows, and you cannot easily add new features or functionality.
15. Limited reporting capabilities
Should you report out of a system or from Excel? Reporting is one of the most important aspects of financial operations
However, spreadsheets have very limited reporting capabilities. This is because they are not designed for complex data analysis.
If you need to do any sort of advanced reporting, you will likely need to use another tool such as Vision Q&A.
16. Compliance risks
If you are subject to any sort of regulation, such as GAAP or IFRS, using a spreadsheet can put your organisation at risk of non-compliance.
Spreadsheets are simply not designed to meet the requirements of these regulations.
Myths About Using Spreadsheets
There are a few myths about using spreadsheets that need to be debunked.
Myth: Spreadsheets are free.
Truth: The cost of using a spreadsheet is often hidden in indirect costs, like the opportunity cost of not having access to accurate and timely data or the cost of errors due to manual entry.
Myth: Spreadsheets are easy to use.
Truth: While spreadsheets may be easy to use for simple tasks, they can quickly become complex when trying to do more sophisticated calculations or manage large amounts of data. This can lead to errors and take up a lot of time.
Myth: Spreadsheets are secure.
Truth: Because spreadsheets are often stored on personal computers or shared drives, they are not always secure. If sensitive data is stored in a spreadsheet, there is a risk that it could be accessed by unauthorized users.
The Benefits of Using Spreadsheet
Even with the hidden costs and risks, there are still some benefits to using spreadsheets.
One of the main benefits of using spreadsheets is that they are familiar to most people. Spreadsheets have been around for a long time, and many people are already comfortable using them.
2. Ease of use
Another benefit of using spreadsheets is that they are relatively easy to use. Even people who are not familiar with spreadsheets can usually figure out how to do basic tasks.
Spreadsheets are also quite flexible. You can add or remove columns and rows as needed, and you can easily change the format of the data.
While there are some hidden costs associated with using spreadsheets, they are often cheaper than other software options.
Spreadsheets are also very accessible. They can be used on a variety of devices, including computers, tablets, and smartphones.
How to Choose the Right Tool for Your Financial Operations
When it comes to financial operations, it is important to choose the right tool for the job. Spreadsheets have their place, but they are not always the best option.
If you need to do any sort of advanced reporting or data analysis, you will likely need to use a tool such as Vision Q&A.
For more complex tasks, like accruals or allocations, using a dedicated accounting software solution like SunSystems or NetSuite will be more efficient and accurate. And for compliance purposes, it is important to use a tool that is specifically designed to meet the requirements of the regulations your organisation is subject to.
If you are looking for a tool that can help you with financial operations, please get in touch with us. We would be happy to help you find the right solution for your needs.