Think Excel reporting is less expensive than reporting software? Think again.
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 are you really saving money with Excel? Unfortunately, the answer is no.
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. In an effort to save your company from the same fate—and potentially make a positive impact your organization and the U.S. economy in the process—I’ve compiled four hidden costs that you need to be aware of.
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’s assuming he works only on reporting for 30 hours a month—so this number could go up exponentially based on 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!
Now, keep in mind that 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. As you can see, the costs associated with manual labor for the reporting process add up rapidly once you start breaking them down.
It’s also important to note that using reporting software is a 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 (due to the fact that all of the formulas and reporting structures are already in place with reporting software). This time and cost savings will also have an effect on the economy as a whole.
How? 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.
Now, we’ve established that the manual review process is time consuming (to say the least). But what about the amount of time that is wasted on data entry errors alone? 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.
Unfortunately, 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.
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 robust 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.
That being said, firms who are using Excel as the solution for their robust 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.
There are so many great options for automated reporting on the market, so it simply doesn’t make sense to house all of your data in a tool that isn’t right for the job.
So, now you know that the number of errors that can—and will—creep into your Excel reporting is staggering. But what does this mean for your team’s productivity? Well, 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.
Essentially, 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, but it’s critical, and it shouldn’t be overlooked.
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.