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The Trouble With Spreadsheets
Their many limitations for the
construction industry can be
overcome with relational databases
BY FRED ODE
Charles Brown, owner of an
electrical contracting business
in Columbus, is like a lot
of construction business owners. As his
business began to grow, his reliance on
spreadsheets morphed into a complex,
inefficient mess. “I could have literally
wallpapered a small office with the
spreadsheets that I regularly used for
our accounting and job analysis,” Brown
told me. “I could not pull the information
together to give me one source of data…
and it was getting out of control.”
But he was reluctant to trust that new
technology would solve his problems.
Brown’s story is not unique. A large
majority of medium-sized construction
companies continue to rely on spreadsheets
even though poor data integrity,
accuracy issues and little time for data
analysis are all common complaints.
A better alternative
Since the spreadsheet era, newer and
more sophisticated planning, budgeting
and forecasting tools have been introduced.
With programs designed specifically
for construction, they promise a
greater level of operational detail, more
robust reporting, better analysis and
quick consolidation of financial data–at a
relatively inexpensive cost.
Among the drawbacks of spreadsheets
is the vast amount of time spent
on manual processes of “racking and
stacking” data. Because they are easy
to use, staffers like to create more and
more complex spreadsheet systems.
They end up spending way more time
building and maintaining spreadsheets
than they do analyzing the actual figures.
Soon, the data are outdated and the
ability to get a clear picture of the company’s
financials is all but impossible.
That’s what finally convinced Brown
to abandon his over-dependence on
spreadsheets. After switching to a construction-specific, job cost accounting
system nearly 11 years ago, he’s convinced
that his business has survived,
and thrived, because of the change. “As
reluctant as I was to give up what I
knew” he told me, “ the fact that I had a
hard time tracking my income and
financials was an even greater concern.
Now I can see exactly where I am really
at, at any given moment.”
Software & spreadsheets
Brown could have replaced his spreadsheet
accounting program with an off-the-shelf, non-construction specific
software package. But, he may have
found himself recreating nearly as many
spreadsheet reports as previously.
Off-the-shelf packages are inexpensive
and easy to use, but offer limited
functionality to construction contractors.
Such packages often force the business
owner to adapt their business to the
application, rather than the other way
around. Non-construction specific packages
also do not offer integration between
job costing, general ledger and
other modules. As a result, there is no
easy way to manipulate data and see job
costing numbers in different ways.
Spreadsheet software can store
important information, perform complex
calculations, link to other worksheets
and so on. However, large amounts of
data can quickly deteriorate the integrity
and usability of spreadsheets. In general,
the larger the size of your data, the
more likely you are to need more sophisticated
technology found in a database
management system.
New technologies
To explain the difference, spreadsheet
data is called flat or non-relational because
it is held in a single page or sheet,
referenced only by its cell. To update this
information, the user must find and enter
data in the right cell in the right spreadsheet.
Because spreadsheet reports are
fixed-format, they cannot show the data
held within them in any other way.
In contrast, data held in a database
system are called relational, meaning they
have a one-to-many relationship with
other data in your database. Data entered
just once flows automatically to appropriate
modules and data tables, allowing
users find data in countless ways. Relational
databases can store millions of
pieces of data in a secure environment.
While spreadsheets still have a place
within the finance office–for calculations,
ad hoc queries and what-if scenarios–it
is clear that there are better technologies
available to the construction financial
manager. Construction-specific accounting
systems that use relational
databases offer what spreadsheets
don’t: up-to-date, accurate information
and flexible reporting capabilities.
Fred Ode is the founder and
chairman/CEO of Foundation
Software, Inc. For more, visit
www.foundationsoft .com or call
800-246-0800. |
