Spreadsheets are extremely adept at creating ad hoc applications. They can be applied to several financial areas such as:
- Budgeting and forecasting
- Financial statement notes’ workings
- Inventory valuation
- Fixed asset registers
- Financial modelling
Many finance professionals will easily spend hundreds of hours a year on these spreadsheets; it takes endless collaboration with several people, setting up data connections, writing macros, version control consideration, backup processes, refreshing data, updating templates, fixing formulas… the list goes on. It can be quite impressive to see what can be done in Excel. But, when more technology-based solutions exist out there, one must ask if they could be spending their time on other value-adding activities for the business and rather than spreadsheet building and maintenance.
Another huge driver for building and using these spreadsheets, apart from the great ability to customize them to the need, is that unfortunately VAT monitoring and reporting capabilities are not strong features when the ERP systems are considered and implemented.
Excel has the familiarity and comfort of a well-worn pair of shoes. Although quite commonplace in any finance team nowadays and over the past 20 years, spreadsheets such as Excel still garner significant risks and costs if not properly monitored and controlled. It is also very hard to change; entrenched in the familiar, finance professionals will default to using trusty old Excel to solve every problem, both big and small, that comes across their desk rather than switching analysis to simple, powerful tools which have been known to solve some of those same problems.
But in complex organisations, these “trusty” spreadsheets aren’t the answer for managing important tax and VAT data analysis and reporting. These are six main reasons why spreadsheets can fall short when calculating the figures for tax and VAT analysis and reporting:
- Large data sets. More complex systems with high data volumes easily exceed Excel rows limitations. Switching to Access or SQL is often the only solution after exceeding the row limit which are often not familiar or used as much by normal finance professionals.
- Time loss and bad user experience. Often the spreadsheet is built by a single person and other people find it hard to use the report, which can result in errors and huge losses in time when it falls to a new person to update and work with.
- Version control issues. Spreadsheets are often local/desktop-based and can be subject to version control issues which is not the case with a server-based solution.
- Easy to manipulate. Spreadsheets lack data integrity and can be easily manipulated without any record of changes.
- No forced structure. Something which is fully customization is great but can also be problematic when working across multiple spreadsheets. Slight differences in format, data type, date format or field names can quickly become unmanageable.
- Expensive to compile. Maintaining and fixing spreadsheets is not a good use of a highly skilled professional’s time. These hours could be better spent on more high-value tasks.
But does a world without spreadsheets even exist?
More and more technology firms realize that spreadsheets are falling short for complex finance-related work and have been setting out for years to create software that is specifically designed for these tasks and users. There are software solutions specifically for consolidations and financial statement notes as an example, but few realize there are also options for VAT and tax. These are automated, big-data, purpose-built tools for those responsible for VAT. Even where there is an overlap of functionality with those trusty spreadsheets, the software is always quicker and simpler to use. Spend some time researching solutions and you will be surprised at the options that technology provides.