For the small business, Excel is a fantastic tool. It allows for a reasonable amount of reporting, budgeting, analysis, forecasting, etc., is inexpensive, and is widely understood within the finance industry.
This means that most employees are already trained and comfortable using it. These things make it a practical choice, at least until the business grows. But once you begin adding complexity to the business with operations overseas, acquisitions of other businesses, or the in-depth reporting required to satisfy the interests of venture capitalists, Excel for financial consolidation and close management quickly becomes unable to keep up. Here are five ways to know when you’ve outgrown Excel for financial close and consolidation and it’s time for EPM software.
1. Closing in Excel is Too Time-Consuming and Tedious
As the business grows and expands, Excel spreadsheets quickly become too large, cumbersome, complex, and error-prone to close out with confidence.
When you begin the process of closing, you start by exporting trial balance data out of the general ledgers or ERP software and collect the data into spreadsheets that have to be reviewed and processed manually. As the number and complexity of these spreadsheets grow, the process soon becomes too time-consuming and tedious to do by hand. When the close process stretches into weeks of long hours and laborious effort, you know you’ve outgrown excel and it’s time for EPM software.
2. Data in Excel Isn’t Necessarily Accurate
Excel is inherently manual. Usually, as long as a single person or a small group of people are working with the data, charts, formulas, etc, it can be kept reasonably accurate. However, as the number of people who work with these spreadsheets grows, more and more errors are introduced into the data. Many companies proceed as if the spreadsheets are accurate, even though about 88% of all business spreadsheets used for close and consolidation contain errors. When errors become a problem (and errors always become a problem in Excel as the business grows), it’s time for EPM software.
3. Excel Isn’t as ‘Smart’ as Enterprise Performance Management
Excel has formulas, and when smart people use handy formulas, the program seems really smart. In fact, Excel is not smart at all, the users provide the smarts. EPM software, however, has logic programmed into the design. The built-in formulas, templates, etc. have an inbuilt understanding of the finance rules behind the operations. It understands how to apply debits and credits, calculate income, expenses, variances, etc. When the accounting standards change or the company alters its guidelines, these changes can be built into templates and applied across the system instantly. When you need this kind of intelligence and power behind your finance software, it’s time for EPM.
4. Excel is Inherently Insecure and Difficult to Audit
An EPM system can’t be emailed or stored to an insecure consumer cloud service. This means that your data is kept within your business’ control.
In Excel, all the data is visible to all of the users. A spreadsheet can easily be emailed, which is a huge security risk. Spreadsheets are also easy to upload to consumer-grade cloud storage, such as Google Docs, which simply does not have the enterprise-grade security necessary when handling sensitive corporate documents. In EPM, you can control where the data is stored and who has access to it. It’s not only more secure, but it also establishes a clear and easy-to-follow trail for auditors.
5. Excel is Inflexible Compared to Enterprise Performance Management Software
In Excel, making changes means going through, trying to find and identify each instance of that issue in all of the complex spreadsheets, and hoping all the changes were found and changed, without introducing more errors into the data. In EPM, however, changes are made in a single location and are automatically applied throughout the software. EPM can even handle things like multiple currencies, partial entity ownership, and chart of accounts translations.
If Excel isn’t handling it for your business anymore, it’s time to upgrade to EPM. To learn more about why it may be time to upgrade to an EPM software solution check out our free white paper.