Why Excel, the Swiss Army Knife of CFOs, Is Hitting a Wall in Financial Reconciliations

Blog post

Nowadays, Microsoft Excel has become an essential tool for any financial professional. The financial equivalent of a Swiss Army knife, it can perform an impressive array of calculations, graphics and other tasks. But here’s a question: Have you ever tried to drill a hole with a Swiss Army knife?

This is the problem many financial professionals face today. While Excel is great for many tasks, it has limitations when applied to the complex and process-driven tasks surrounding the reconciliation of accounts. As one Excel user told us: “I’m very tired of Excel as a professional tool in established processes. It’s good for ad-hoc solutions but useless in established processes.”

“Excel is good for ad-hoc solutions but less useful in established processes.”
CFO – automotive financial services company

Cumbersome spreadsheets
What did she actually mean? Well, every business has its own best practices for the financial close. And while these vary from company to company, the objective is always to achieve a faster and more reliable close. Yet Excel makes this tough. The nature of the program and the way it’s generally used, with financial units creating their own spreadsheets in silos and uploading them to a central server, makes it difficult to get a clear view of task allocation. This is especially true for business procedures involving increased frequent and complex transactions.

Costly implementation process
To start with, Excel is not really a plug-and-play, hit-the-ground-running solution. You still have to put a lot of time into programming and formatting to ensure data is correctly imported, formatted and organized before users can start applying the formulas and functions. These functions must also be tested and retested for accuracy. You can also end up with hundreds of account tabs per spreadsheets, which quickly become bulky and out of date.

3 in 4 European companies with sales over €10 million still reconcile financial data using pen and paper or cumbersome spreadsheets.

Risk of human error
Despite these well-known challenges, an independent survey found that 3 in 4 European companies with sales over €10 million still reconcile financial data using pen and paper or cumbersome spreadsheets. The risk of human error is estimated to be around 0.8%. That might not sound huge, but if you process 100,000 transactions per day, you could be getting around 800 to 1,800 errors. All of which can significant impact accuracy and lead to hefty penalties.

The benefits of automation
Companies are now seeing the limitations of manual or semi-manual controls, including cumbersome spreadsheets, has reached its limits. Many are turning to automated reconciliation software to gain the following benefits:

• Lower costs
• Reduced risk
• Improved compliance
• Better control and overview

Embracing change to win
According to Accenture, the most successful companies in the years ahead will have modern finance departments that are able to capitalize on the digital transformation going on. Their CFOs and financial staff will no longer be viewed as number crunchers and controllers but strategic advisors on a range of vital topics. This also means embracing the potential of cloud-based software to accelerate a speed advantage, boost productivity and reduce risks.

Do you want to move up the value chain of finance?

Ready to look beyond Excel spreadsheets to streamline your reconciliation management and embrace the future? Would you like to know more about how to improve your Bank Reconciliation process? Read more about how Adra Accounts can help you.