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Accounting Software Checkup
BY: FRED ODE
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NO. 1: THE SYMPTOMS OF
SPREADSHEET ADDICTION
Editor’s Note: Following is the first article in our ten-part series called,
“Accounting Software Checkup: Ten Ailments That Can Hinder a Healthy Bottom
Line,” by Fred Ode, CEO, chairman and founder of Foundation Software. Each “ailment”
will be discussed in detail to help you determine if your seemingly healthy
business has an underlying problem.
As the saying goes, an
ounce of prevention is
worth a pound of cure.
But not everyone takes
the time for routine
annual exams. Busy with day-to-day
activities and demands, we tend to
take our health for granted—until we
experience some symptoms of disease
or illness.
Your accounting software—much
like your body—may appear healthy
from the outside. However, it’s very
possible that your program may be suffering
from some common ailments.
These ailments, if left untreated, could
lead to serious (and sometimes fatal)
results. As the “brain,” which holds all
the financial decision-making data,
and the “heart,” which pumps cash
in and out, your accounting system is
vital to the life of your business.
For more than twenty years, contractors
have relied on spreadsheets to
help run many aspects of their business—
from estimating and budgeting,
to job cost reporting and forecasting.
Spreadsheet technology—with its
amazing ability to calculate mathematical
formulas in a fraction of time
that it once took to do the same work
manually—was, in fact, the driving
force behind the PC revolution.
But that was then, and well, this
is now. Although there are still many
legitimate uses for spreadsheets (like
compiling data coming from diverse
sources or for one-time analysis
reports) many contractors use them
way too often and for all the wrong
reasons. But try telling that to a
spreadsheet addict. Why do they love
their spreadsheets? Let me count the
ways: For one, spreadsheets are easy to
create, and users don’t require extensive
training. Secondly, information
found in spreadsheets can be changed easily and quickly. And finally, spreadsheets
are extremely flexible, providing
unlimited formatting capabilities
without development or maintenance
support from vendors.
Recognize Areas of Pain
But just because contractors can use
spreadsheets for many applications,
doesn’t mean they should. Some of
spreadsheets’ strengths—for example,
how easy they are to create—are
actually weaknesses. When novice
users create spreadsheets and no one
bothers to examine the logic behind
the calculations, it’s very likely that
those worksheets will contain errors.
Another serious limitation has to do
with the security and stability of
sensitive company data. Since spreadsheets
can be easily copied and shared
with only limited security, they are
open to tampering, which leads to
even more undetectable (and sometimes
costly) errors.
And what about wasting valuable
resources? One of the largest drawbacks
of spreadsheet dependency is
the time staffers devote to creating
spreadsheets and maintaining them.
Do any of these scenarios sound familiar?
-Employees spend so much of their
time updating, consolidating and
re-entering data onto spreadsheets,
that there is no time left
to actually analyze the data.
-Many employees are entering the
same data into separate spreadsheets
in order to see information
the way they like to see it. The
company ends up with “islands” of
non-linkable data.
-The person who maintains the
company’s spreadsheet reports
leaves the company/goes on vacation/takes a leave of absence,
forcing other employees to spend
countless hours trying to maintain
the reports that everyone
relies on to do their jobs.
The Common Cause of
Dependency
In construction, most spreadsheet
abusers have one thing in common:
insufficient reporting capabilities
from their accounting software.
Usually, these businesses are using
off-the-shelf small business systems,
which simply do not have the construction-specific reporting features
that contractors need. Because these
applications do not integrate data
between general ledger, job costing,
payroll and other modules, there is no
way for users to manipulate their data
and see job costing numbers in different
ways…except by exporting data
to spreadsheets.
As a business grows and the need
for more specific financial, management
and job cost reporting increases,
spreadsheets gradually become less
helpful and more burdensome.
A Cure for Abuse
Luckily, there is a cure for spreadsheet
dependency. Today newer and
more sophisticated accounting software
programs—designed specifically
for construction and built upon powerful
database engines—are available
at costs that even smaller contractors
can afford. These programs offer a
better alternative when it comes to
data storage, reporting, efficiency,
accuracy and security.
Database systems simply make
it easier to store and retrieve data.
Information entered once can be
linked to other data, creating infinitely greater reporting possibilities.
This tight integration of information
(from payroll to job costing and general
ledger, for example) helps greatly
reduce data entry errors. And unlike
spreadsheets, construction-specific
accounting systems offer other such
security features such as data entry
validation, customized defaulting,
complete audit trails and crash protection
technology.
In addition, most sophisticated
construction accounting systems
contain date-sensitivity features,
which allow users to run standard
or customized reports for any time
period—monthly, weekly, daily or
even past years. And with more power
and speedy processing capabilities,
these accounting systems solve the “too big, too time-consuming” problem
that can plague spreadsheets and
limit their usability.
Finally, not only can database systems
easily handle tens of millions of
records, but they also accommodate
multiple users, and each user can have
different data permissions. Instead
of relying on one person to produce
spreadsheet reports, losing access to
a spreadsheet because someone has
the file open, or taking the risk that
a template has been tampered with,
a database system gives many users
access within a secure environment.
Based on the telltale symptoms of
spreadsheet abuse, is it possible your
company suffers from this debilitating
ailment? Fast, easy and extremely
flexible spreadsheet applications will
probably always have a place within
the contractor’s office. But if you need
up-to-date, accurate job cost accounting
information and flexible reporting
capabilities, construction-specific
accounting systems are just what the
doctor will prescribe.
Fred Ode is the CEO/chairman of
Foundation Software, developer of construction
job cost accounting software
called FOUNDATION for Windows. For
further information on FOUNDATION
for Windows, visit www.foundationsoft.com.
Fred Ode can be reached directly
by phone at 800.246.0800 or e-mail
fred@foundationsoft.com.
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