Getting out of Excel Spreadsheets

Like many accountants, I love Excel. However, there are times when Excel is not always the best tool to get the job done. Here are some indications that it may be time to get out of Excel:

• The Excel workbooks have become complex & unwieldly to maintain, creating risk of errors in formulas and data.
• Excel is being used as a collaborative tool, such as in the budget process or consolidated reporting.
• Excel is doing the job one of your systems should be doing, such as tracking budget-to-actual reporting or bank reconciliations.
• Excel is being used to try to calculate complex schedules and activities that one of your systems should be performing, such as: 
  • Expense Allocations
  • Deferred Revenue Schedules

Here, we speak to five common misuses of Excel and what we recommend as alternatives.

Budgeting

We speak to a lot of organizations who are still using Excel to create their organizational budgets. For a smaller organization, with only one additional dimension of budgeting (such as departments) and limited budget collaborators (less than ten), Excel may be serving its purpose well enough. However, once you get into more complicated budget models, with scenario planning, multiple dimensions, and numerous budget collaborators, we recommend evaluating and selecting a financial planning and analysis (FP&A) tool for budget development.

FP&A systems allow multiple stakeholders to view historic budget-to-actuals, provide input into the overall budget based on their permissioning, and run scenarios, such as wage and benefit increases. As with all ancillary financial systems, we recommend selecting a system that integrates with your general ledger (GL) for real-time budget-to-actual reporting and analysis.

Financial Reporting

I am still surprised at the number of organizations that are pulling financial information out of their GL and then manipulating it in Excel to produce financial statements. Whether the reasoning is reformatting or introducing additional calculations, clients are spending hours of highly compensated resource time producing financial statements which today’s systems should be able to produce.

The first two places to look is to your GL system and your FP&A system. Hopefully, you have modern, cloud-based systems that offer robust reporting options and user dashboards, so that necessary reports can be created in systems. If not, we suggest considering the development of reports using data visualization tools such as Tableau or Power BI.

Bank Reconciliations

We have spoken with numerous clients who manually record every single bank transaction in an Excel workbook to tie out to their bank statement. The purpose of a bank reconciliation should be to confirm the transactions recorded in your GL based on your daily accounting activities. Nearly all GL systems offer some form of bank reconciliation module. Reconciliation of cash accounts within the system is the first step in the month-end close process and tracking those transactions in Excel is duplicative and unnecessary.

Expense Allocations

Many nonprofits have numerous allocations, such as salaries and benefits across grants or cost centers and indirect cost allocations. I have seen some extremely complex Excel schedules that allocate individual staff across entities, departments, and grants, to create journal entries to subsequently enter in the GL.

Ideally, the allocation occurs at the earliest point in the process – at the time of transaction. In this scenario, employees would be coding time to the grants or projects they are working under and would be assigned a default department in the payroll system. This time-data would integrate into payroll, creating payroll reports already allocated by department, grant, project. For subsequent allocations, look for allocation tools within your GL system to help automate that process.

Deferred Revenue Schedules

With the introduction of new revenue recognition standards, the tracking of contribution revenues has become more complex.  Many nonprofits have recognized that some of their revenues need to be coded as deferred, until they have reached certain milestones. This has led to complex Excel schedules to track those milestones. In other cases, an organization may have subscriptions, such as dues or contracts, that need to be recognized over a period of time.

Modern GL systems should help create these schedules for you, by offering revenue recognition capabilities that allow you to recognize revenues over a pre-determined schedule or template, such as by month or by completion of a specific task or outcome. Tracking and reporting of schedules and due dates can also be done in the right systems.

Summary

These are just some of the many instances when an organization could benefit from looking beyond Excel for software solutions.  There are many other accounting functions that can be easily moved out of Excel, such as fixed asset activity and tracking of investment or endowment activity.  If you find yourself wondering how moving out of Excel can create opportunities and efficiencies for your organization, we can assist with a business opportunity assessment – We’re here to help.