Why Spreadsheets are a Bad Idea for Expense Management

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Can you imagine what your business trips would be like if you were only allowed to use the conveniences available 40 years ago? No e-mail, no internet, no cell phones, no laptops or mobile devices; a business traveler was an island unto himself. Expense reports were a stack of paper receipts waiting to be written up, stapled together and submitted to the accounting department after returning from the trip. For some companies, the only changes expense management has seen in the decades since that time is the switch from a manual write-up to a manual key-in on a computer spreadsheet. Not much of an upgrade, right?

If everything associated with business travel has been upgraded save for expense, an area which is meant to carefully track responsibility with company cash, maybe it’s time to pull T&E into the 21st century – and dump the spreadsheets. Studies have shown that up to 60% of spreadsheets contain errors, which can significantly impact the financial data the AP department is presenting as factual. We all know the sort of trickle-down effect keying mistakes can have on a company. Bad numbers lead to bad decisions or public relations meltdowns that can hurt stock prices and the company image. Sarbanes-Oxley compliance now demands a certain level of accountability for accurate financial management and record-keeping, but many companies continue to maintain the spreadsheet status quo, rather than make the investment into automated software that helps minimize touches and keystrokes – and the human errors that come with them. Dodging risk only works for so long, however; the companies who make headlines every week for accounting failures are examples of what happens when luck runs out.

Raymond R. Panko, a professor at the University of Hawaii and a researcher of end user computing paints a fairly stark view of what is likely lurking behind corporate spreadsheet-centric financial records: “Every study that has attempted to measure errors, without exception, has found them at rates that would be unacceptable in any organization. These error rates, furthermore, are completely consistent with error rates found in other human activities. With such high cell error rates, most large spreadsheets will have multiple errors, and even relatively small “scratch pad” spreadsheets will have a significant probability of error.”

Multiply that research by the amount of spreadsheets that filter through your AP department every year, and you can get a better idea of the scope of the problem. It’s time to stop running companies like they exist in a Mad Men-esque era. Today’s financial record-keeping is regulated with expectations that companies are using modern financial reporting systems. We’re well past the point when spend management errors can be blamed on a spreadsheet – it’s just a matter of how many more headlines need to make the news before companies start leaving them in the past where they belong.