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Are Spreadsheets Spreading You Too Thin?
BY FRED ODE
When spreadsheet technology was first
introduced more than 20 years ago, financial
managers and business owners fell
instantly in love with the software.
Amazed by the desktop power, they began
to create formulas, data cells and worksheets.
Over time, their spreadsheets kept
spreading and spreading and spreading.
So why do many construction companies
rely primarily on spreadsheets to perform
their planning, budgeting and forecasting
processes? The simple answer is
because they can.
In its day, job costing in spreadsheets
was fast, efficient and leaps ahead of manual
methods. The first spreadsheet program,
Viscalc, is actually credited with
being the force behind the PC revolution.
No other application in the history of
computing has had the power to completely
transform the way things were
done, especially with financials.
Since then, newer and more sophisticated
budgeting and forecasting tools
(designed specifically for construction)
have come on the market at relatively inexpensive
costs. Yet despite faster and more
productive methods, many financial managers
continue to rely on spreadsheet applications
for their accounting functions.
There are generally three reasons why:
1. Contractors know spreadsheets and
know how to use them.
2. Their software doesn’t do all they
need it to.
3. They are unfamiliar with sophisticated
construction-specific software and
its capabilities.
SPREADSHEETS DO IT ALL… OR DO THEY?
Among other reasons, people love spreadsheets
because they are easy to use, and can
be copied and shared with users throughout
the company. But those attributes also can
be problems.With limited security, spreadsheets
are open to tampering that can lead
to undetectable errors. Password protection,
the only security feature of spreadsheet software,
is impractical in offices where many
users can access the software. As a result,
sensitive company data held in spreadsheets
is open to many unauthorized users.
In contrast, most job cost accounting
programs as well as other construction-specific
applications are maintained in
secure databases, designed to handle multiple users. Reports can be shared and networked
without concern about tampering.
And unlike spreadsheets, which
become unwieldy with large amounts of
data, more sophisticated applications can
handle tens of millions of records in a
multidimensional way rather than as static,
non-historical data.
Aside from its other drawbacks, the
greatest liability of spreadsheets appears
to be the hidden cost of wasting valuable
resources.When staff spends their days
updating, consolidating and re-entering
data into spreadsheets, little time is left
for financial analysis. It’s simply an inadequate
and inefficient way to handle data.
OFF-THE-SHELF SOFTWARE PERPETUATES
SPREADSHEET DEPENDENCE
Contractors that replace their manual or
spreadsheet accounting tools for an off-the-shelf
software package often recreate nearly
as many spreadsheet reports. That’s because
generic software doesn’t offer the kind of
date-sensitive drilldowns and detailed
reporting capabilities contractors need.
Without the ability to integrate data
between general ledger, job costing and
other modules, it becomes impossible to
manipulate data and see job costing numbers
in different ways. People fall back on
spreadsheet use and create additional
work because these files need to be constantly
updated and maintained.
GOOD BUSINESS PLANNING
CALLS FOR RELIABLE DATA
Most experts agree, there is still a place
for spreadsheets within the financial
department, but their use as a tool for
budgeting, forecasting and reporting has
been outlived and overused. Spreadsheets
remain an excellent tool for what-if scenarios,
allowing users to quickly develop
new ideas or prototypes for growth. They
also are helpful at creating specialized
reports or ad hoc queries to quickly
answer precise operational questions.
But when it comes to budgeting, forecasting
and job cost reporting, integrated
construction software clearly wins. It’s the
one place where all company financials
can be seen all at once. And because the
data is stored in one place, it can be examined
in hundreds of ways. Each transaction
is entered once and flows to other
areas where appropriate. Date-sensitivity
features mean customized or standard
reports can be run for any time period—
monthly, weekly or even daily.
THE BOTTOM LINE WITH SPREADSHEETS
Functionally, spreadsheets possess the
power to calculate and formulate information
in a number of ways. They’re flexible,
easy-to-use and can be found on
nearly every office PC. Their historical
and lasting contribution to business efficiency
goes without saying.
Realistically, however, companies need
to do their own computations to determine
if spreadsheets offer the best view
of financial data.When compared to specialized
financial software packages,
spreadsheets fall flat in such areas as
multi-dimensional reporting, security,
data capacity and integrity, networking
and multiple users.
Now is the time to ask, are spreadsheets
spreading you too thin?
Ode is CEO and chairman of Foundation
Software. For more information, call (800) 246-
0800 or email, fred@foundationsoftware.com.
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