By Pamela Phillips
Are spreadsheets putting the breaks on your agency?
As accountants we are in the very privileged position of being invited into people's businesses to help them, not only report their numbers but to run their day-to-day operations more seamlessly and become more profitable.
Because of this, we have more insight than most into what makes a business successful, scalable and valuable. What we can tell you is that businesses are like swans. While they may appear super graceful and successful on the surface there is always a lot going on underneath the water to keep the bird (business) afloat and some of it is not pretty.
A common theme we find is an over-reliance on spreadsheets. If you are scaling up, or making plans to sell your business, but are still using spreadsheets to run it, then now is the time to consider moving away.
So what are people using spreadsheets for?
- Accounting records This is an absolute no in our (expert) opinions! We believe it is so important that accounting records are properly maintained on proper accounting software that we only work with clients who keep their records on Xero.
- Budgets and Cashflow forecasts. Not as bad as using it for your accounting records but did you know there is software out there that will integrate with Xero and help you do your budget and cashflow for you such as Futrli or Fluidly.
- Timesheet tracking. If this is you, take a look at our blog that compares Harvest, Xero Projects and Workflowmax all of which will do this better than a spreadsheet.
- Profitability tracking Xero tracking categories does this well.
- Sales Pipeline. This is not a bad one to do with a spreadsheet but be mindful of the issues noted below.
- Pricing tool to feed into pitches for work.
What is wrong with spreadsheets?
A business run on spreadsheets is difficult to scale successfully and will have a lower value than one that is built on robust processes and uses good and integrated systems.
There are 4 reasons why this is the case.
1) Risk of error
Spreadsheets are error-prone. Any process that involves someone manually typing data into it will be vulnerable to errors. We are all human, no matter how much care we take, errors will creep in. Unless a spreadsheet is properly set up with good checks and controls then these errors can go undetected for a long time.
I would hazard a guess that we find errors in almost all spreadsheets that are shared with us. The errors arise for a number of reasons including:
i) because numbers have been typed in incorrectly,
ii) totals fail to include the complete range of cells,
iii) formulas are hardcoded, amended or broken,
iv) cells are missing data,
v) data inconsistencies with other systems or spreadsheets in the business
Data usually needs to be collated and entered manually into the spreadsheet (I say usually because there are some great apps out there like G-Accon that can pull data from systems like Xero directly into Google Sheets).
Spreadsheets are usually dependent on one person, or at best a small number of people, updating them because nobody else in the business knows how they work (or even where they are saved)!
Time-consuming processes like updating spreadsheets are costly and inefficient. Do you really want one of your directors spending a few hours every week typing numbers into a spreadsheet?
It is also likely there will be delays in sharing the output of the spreadsheet with key stakeholders due to the time that is taken pulling it together and then distributing it.
3) Difficult to Analyse
Spreadsheets contain a lot of raw data that can make it difficult to draw out the key issues and trends making the phrase ‘can’t see the wood for the trees’ very relevant.
4) Poor for collaboration and engagement
It is difficult to share and collaborate with spreadsheets. For starters, how do you share it without ending up with version control issues?
When it is shared, is it easy for all to understand how it works and what it shows? Usually not and time is wasted working through formulas and data sources to understand what the data means.
5) Limited data security functionality
Spreadsheets do not have the data security functionality that a good app does nor do they have the ability to restrict access to certain users.
What do we recommend?
Move your business-critical processes and reports off spreadsheets and onto appropriate software!
This sounds simple but it can take some work. First to identify which is the best app to use for your business and then to migrate all your data, set up a process for maintaining the new software and training your team on how to use it.
If you are not sure how to go about doing this and want some help then please get in touch. We have lots of experience running projects to get our clients away from spreadsheets and onto appropriate software.
Who are we?
We are Accountants and business advisors based in Epsom, Surrey who work with agency clients all over the UK as their finance team.