Financial Reporting: Spreadsheet vs. Cloud

Are Excel Spreadsheets the Right Tool in the Cloud Era?

Reliance on Spreadsheets

Finance has relied on spreadsheets since VisiCalc, MultiPlan and Lotus 123 took over for the 14 column pad in the 1980’s. Today’s finance departments cling to Excel citing usability, followed by manageability, reliability and product functionality as the top reasons. Concerns also include cost. Excel is not going away so any additional software increases direct cost.

I was working with a partner on revenue allocation based upon convoluted contractual obligations. The multi-tab spreadsheet was the perfect medium for calculations and had multiple checks built in. No ERP or other tool could make proper calculations for this contract! Although the results were accurate, we found ourselves questioning the results because of inconsistencies in formulas in the audit controls. This example shows the pros and cons of reliance on spreadsheets. Unparalleled flexibility combined with the hidden cost of customized formulas in multiple cells and the hidden costs of checking, double checking and questioning the accuracy.

The most common unspoken reasons is control. Accountant by nature are risk averse and want to “know” how the numbers were generated. When the spreadsheet is on their computer or the accounting network folder it is tangible and under control. People outside accounting get frustrated by the magical spreadsheet, but the accounting department knows how it works and is comfortable with the spreadsheet it creates. The result is finance departments consistently being the least likely functional group to want to deploy software in the cloud.

The Case for Financial Reporting in Spreadsheets

Users cite a variety of reasons to continue the age old, proven method of spreadsheet reporting.

• Parse and Adjust – Most systems will output the trial balance which can be loaded into a pre-formatted workbook. Then accountants parsed data department and manually adjust as needed.
• Formatting Flexibility – Excel formatting is powerful and easy! This is especially true for executive or board of directors presentations. The use of color, bold fonts and graphs make it easy for readers can find the data they’re looking for.
• Familiarity * Accountants can share information to non-financial people in a tool that almost everyone has on their desktop.

Although there are many other reasons cited, most of the functionality gaps formerly filled by spreadsheets have been plugged. For example, the ability to do what-if analysis for the impact of a transaction can often be performed in the accounting software with “unposted transactions”, or in the modern cloud reporting tools.

Cloud Financial Reporting

The objectives of cloud financial reporting software are:

• Automate reporting,
• Organize financial data as required by the business or external parties
• Report on trends that impact business goals.
• Meet regulatory and other compliance reporting requirements
• Provide business owners greater visibility and insight into the workings of their business.

The primary cloud financial reporting tool is a company’s cloud accounting software. Most accounting software provide standard financial reports including trial balance, income statement and balance sheet. Some also include indirect cash flow statements, budget vs. actual income statements, comparative reports and even monthly or quarterly trend reports. Good ERP software provides drill down to the detail ledger and original transactions.

Cloud financial reporting tools are enhancements to traditional accounting and business management software. Leading cloud financial reporting tools work with multiple systems and receive transactions on a near-real time basis.

Financial reporting and analytics are different. Although financial reporting software often include non-financial information, such as unit counts, they are not designed for ad-hoc reporting. Analytics query data to answer questions as required or provide dashboards. Financial reports are typically in a fixed formats with rows and columns similar to a spreadsheet.

The Case for Cloud Financial Reporting Tools

Companies turn to spreadsheets and cloud financial reporting tools when complexities increase and the out of the box reports are insufficient for management or compliance reporting. The more complex the requirements, the weaker the “out-of-the-box” reporting appears, and the more frequent companies turn to spreadsheets or cloud tools. Examples include:

Management Reporting

• Consolidations – When there are multiple legal entities only the largest and most sophisticated accounting meet the needs for consolidated reporting
  • Consolidations required elimination of intercompany transactions to mitigate double counting of transactions
  • Multiple entities often have disparate charts of accounts. Mapping tools to group transactions into the proper classification.
  • Multi-level consolidation by country, region or line of business
  • Disparate or multiple year ends within or across entities
• Organizational – Create income and or expense statements by department, cost center or other organizational unit.
• Comparative and Trend – Comparisons by budget prior period, multiple periods, and rolling periods

Compliance Reporting

• Banking or Investor – External financiers often have specified rules or formatting requirements.
  • Bank covenants exclude certain transactions from measurements
• Multi-GAAP – Companies operating in more than one country are often required to report in US Generally Accepted Accounting Principles (GAAP) while other countries may require International Financial Reporting Standards (IFRS).
• Regulatory – Regulatory agencies often have their own specific exclusions, chart of accounts custom schedules or other requirements. 

When you have one or more of these complex requirements, cloud financial reporting platforms can automate your processes, reduce potential spreadsheet errors and speed your time to close,

Choosing Wisely

As a principle, I do not recommend buying or subscribing to software until the need is clear.

• Use the accounting software built-in reports if they meet your reporting requirements!
• If you are looking for a tool to do unique research on a regular basis, get an analytics or query tool.
• If you need to produce a management reporting package on a monthly basis and want it as you close your books look to a cloud financial reporting package.

There are a good number of tools commercially available on the market. When selecting a tool consider:

• Does it have an integration to your business management software?
• Do you need reports from multiple sources? If so, can it pull from all of them?
• What special features do you need? For example, Are multi-currency or multiple year ends supported?
• How easy is it to produce new reports or change existing groupings?
• Can the report output be used for governmental submission (XBRL or other required format).
• What is their on-boarding process? How long is data loading? How is training perfromed?

There are many cloud financial reporting packages that still use Excel as the reporting mechanism. Although Excel can become slow with large data volumes, these are often best when embedding charts into a distributable reporting book. Non-excel based tools output the data to excel if necessary, however, as soon as Excel manipulation occurs, auditability is diminished.

Mondial Software is a modern cloud reporting package that also offers outsourced report development services. Having a team of accountants who know ERP and the cloud financial reporting platform speeds transition and acceptance of the system. This is especially helpful for meeting new EU reporting requirements for US companies conducting business in Europe.

Need Help?

If you need help, request a System Selection Exploration call. The initial exploration calls are always at no charge “in network.”

Gary Feldman

As a former CPA, Accenture executive and business owner, Gary created the I-BN community and helps companies grow their business and improve efficiency by streamlining business processes through a process oriented digital transformation methodology. Gary serves as a fractional CxO, program manager for companies and is an active speaker, committee and board member of industry organizations.