The 4 Hidden Costs Of Excel Reporting

You’ve probably heard the saying, “There ain’t no such thing as a free lunch,” abbreviated as TANSTAAFL. This saying refers to the cost behind the decisions you make, and more specifically, how you often end up paying, figuratively and literally, for the choices you think are “free.”

TANSTAAFL is extremely applicable to choosing Microsoft Excel as your organization’s reporting tool.

Many organizations have used Excel for a number of things in the past, and they continue to rely on it for the bulk of their financial reporting needs. Some are dead set on not purchasing reporting software in an effort to save money.

‍But you aren’t really saving money with Excel.

I’ve seen the problems Excel has caused organizations of all sizes, as well as the hidden costs that come to light after the fact. To save your company from the same fate, and maybe help your organization and the U.S. economy along the way, I’ve listed four hidden costs you need to know about.

The Four Hidden Costs Of Excel Reporting

1. The cost of the manual review process.

Time is money, especially when it comes to a lengthy endeavor like manual reporting. Let’s say your accountant, Bill, spends 30 hours a month on Excel reporting. If he’s making $70,000 a year (which is $35 per hour), then he will spend more than $1,000 per month by doing manual  reporting. $12,000 a year is nothing to cough at. That’s about 17% of his total working time. And that assumes he spends only 30 hours a month on reporting, so the number could climb much higher with Bill’s workload and job description.

We’re not saying Bill wouldn’t have to spend any time at all on reporting if his company uses a reporting software solution, but the time he spends every day doing tasks that have the ability to be automated could certainly be cut down.

According to the BLS, there are 1.3 million accountants and auditors in the United States. If each of them is spending 17% of his or her time building reports, this could add up to $15 billion  spent on spreadsheet reporting alone!

Bill isn’t the only one who will have to view a report each month. We’ve found that an average report will see eight people before it’s complete. The labor costs of manual reporting add up fast once you break them down.

Reporting software is also the better option financially, despite what many firms may think. Following the logic we used with Bill, our hypothetical accountant, reporting software could save 75% of an organization’s time (because all of the formulas and reporting structures are already in place). These time and cost savings also affect the economy as a whole.

Remember, Bill spent an average of 17% of his time on reporting, which totals $12,000 a year. If Bill switched to SaaS reporting software and saved 75% of his time, even if the software cost $6,000 per year, there would be a total savings of $3.9 billion each year to the economy.

2. The cost of data entry errors.

The manual review process is time consuming, to say the least. Data entry errors waste time of their own. It’s been reported that 90% of spreadsheets contain errors. So, it’s not a matter of if you’re going to make mistakes with Excel reporting, it’s a matter of when you’re going to make them (and how bad they’re going to be).

Let’s assume that the 1.3 million accountants and auditors we mentioned earlier each created 10 spreadsheets per year. Let’s say each spreadsheet error is worth about $100. That would mean that each fiscal year, these simple mistakes would cost the U.S. economy $1.53 billion.

These Excel nightmares aren’t uncommon. From $6 billion spreadsheet mistakes to frustrating day-to-day errors, Excel users have to expect that these types of mistakes will eventually pop up.

3. The cost of repurposing Excel.

Excel was created to mimic graph paper and make it smart and automated for use on a computer. Microsoft had a fantastic idea, and Excel has been a phenomenal success. It is a great tool for complex single-use equations, spreadsheets, and single-use tables and charts. Excel is used by 95% of firms for at least a portion of their financial reporting, so Excel has clearly done something right.

But firms that use Excel for their complex reporting needs, frankly, aren’t being efficient. Pacific Gas and Electric (PG&E) was able to free up their team of reporting people by 50% through the use of reporting software. Once they stopped trying to have multiple people update a single spreadsheet and allowed SaaS software to do its job, they became far more successful.

With so many good options for automated reporting on the market, it doesn’t make sense to house all of your data in a tool that isn’t right for the job.

4. The cost of misappropriated time.

The number of errors that can, and will, creep into your Excel reporting is staggering. That costs your team productivity. It means the intern you selected from a pool of 100 qualified applicants will spend more of her summer fishing errors out of spreadsheets than actually getting things done. And it means your CEO may be more focused on fixing a barrage of Excel errors that could wreck your company financially instead of helping the organization grow and succeed.

Now let’s assume there are 10 people, who each make $100,000 a year, working in a strategic planning office at every Fortune 1000 company. If they were to free up even 10% of their time, those companies would stand to save a collective $1 billion. Think of the additional productivity that billion dollars could purchase in these organizations.

When you use Excel reporting, you have to factor in that some talent will be wasted on erroneous tasks. Many companies don’t think about this, and they should.

Free Lunch? Think Again.

If you have a boss or colleagues who continue to return to Excel reporting, send this article their way, or mention these costs. It may just change their minds.