Handling Errors in Financial Spreadsheets
Love them or loathe them, spreadsheets have become an essential part of corporate life. Companies use them for tons of different purposes and track almost everything on a spreadsheet somehow. Excel has been a great tool for organizing, storing, and analyzing data across every department. Fifteen years ago, when these programs first started to pop up, it was revolutionary. But time has passed and technology has evolved, better solutions have appeared. And there’s a bigger problem—spreadsheets are full of errors. Several studies have come out to discourage businesses from relying on them so heavily. Almost 90% of spreadsheets contains “significant” errors.
What does this mean? Errors range in severity but can have seriously disastrous effects across businesses of any size. Most are running on at least somewhat flawed data. A pair of Harvard economists had built an entire model around spreadsheets that actually contained important errors. If it could happen to them, no one is safe.
Perhaps not surprisingly, human error is the number one cause of this problem. Someone can key an entry incorrectly and throw off an entire quarter’s numbers. But manual data entry is known to be a repetitive, human process. People make mistakes so the system is destined to be flawed. You can’t rely on full accuracy. Acquiring data is inevitably going to require some amount of manual processing but there are ways to limit your risks.
Spreadsheets present a host of additional problems because they lack any control or validation mechanisms. There aren’t any “sanity checks” in place to keep someone from putting letters where numbers are supposed to be. Invoice templates in Excel documents can cause errors and headaches when behind-the-scenes formulas aren’t functioning properly. In more modern invoice creation software, users have the option to configure controls or use logic that’s already been built in to calculate line items correctly. On the payables side, GL allocation has much more control in a system that enforces correct combinations.
Travel and expense reporting is another area where over-reliance on spreadsheets is costing businesses money. The templates are constructed but not always adequately maintained. Employees who are in a hurry or just aren’t sure will categorize expenses incorrectly. Misinformation about how to assign expenses tends to spread in an environment without controls. Audit often has trouble keeping up with the different ways individual employees create expense reports and submit receipts. The workflow approval process for these is also often full of opportunities for errors and lacks transparency. Moving files around on a shared network drive for approval leaves an inadequate trail. Some shared office applications are making some headway but business process improvement software is still the best answer.
Don’t get caught up in problems with Excel or let bad information go unrecognized for months and years. Find a software partner to help elevate your business practices and prepare you for a bright future. NextProcess offers automation services in accounts payable, expense report software, disbursements, and several other aspects of the procure to pay process. Contact us today to see how we can help you.