While accounting excel spreadsheets are undeniably easy to use, widely available and highly adaptable much has been written about the danger of using them in contexts where there is just too much information, or where that information is too important to risk to human error. A prime candidate is the case of rebates: both customer rebates and supplier rebates, where even the smallest error can result in losses of tens or hundreds of thousands of dollars. Since accounting excel spreadsheets are so easy to use it is also easy to make mistakes, to change data, make errors and worse, not spot the errors and carry on with business as usual. The result is that incorrect information can cause issues when you are trying to understand your business’s financial position down the line.
Accounting excel spreadsheets are dangerous: so it’s time to go beyond them
A while ago we shared a blog post: Excel errors: why spreadsheets are so dangerous for rebate accounting that goes into detail about the various challenges facing those who have simply outgrown the ability of accounting excel spreadsheets to manage their complex, confidential calculations.
This blog post speaks to the question: What does a rebate management software solution offer over accounting excel spreadsheets?
- Complexity vs. up-to-date financial figures
While you can set up complex calculations in accounting excel spreadsheets, that is also one of their dangers. One of our customers found that changing anything in their already complex accounting excel spreadsheet was incredibly stressful. “They compared it to performing surgery, as you have the fear that your scalpel might accidentally cut something unintended”, says Heline Deconinck, Client Services Manager. As the anatomy of the accounting excel spreadsheet becomes more and more complex the risk increases.
Additionally, since it’s difficult to see an accounting excel spreadsheet in real-time (Google sheets does its best, but the lag while it struggles with very complex calculations makes it almost unusable at times), the results from the accounting excel spreadsheets are out of date almost as soon as you export them.
A good rebate management system really needs to show you up-to-date financial figures. When those figures are in an easy-to-read dashboard with drill-down capabilities, so much the better! Ideally, both parties should be able to see the results in real-time as well. That gives full visibility to suppliers, resellers and distributors – as appropriate – which not only improves accuracy, but also engenders trust.
Accounting excel spreadsheets generally don’t provide an audit trail. So while some deals are misrepresented on excel spreadsheets, another significant issue is that some deals don’t make it onto the financial spreadsheet at all. This was a big issue for a large distributor in the UK with multiple divisions and ERP systems which made the whole process of tracking rebates via accounting excel spreadsheets nigh-on-impossible.
Since implementing Enable, that same distributor has uncovered over £2m worth of additional rebates from their vendors in the first year alone! The advice here is to implement a system that is easy to use, but forces all parties involved in a rebate negotiation to document information. And look for auditability when you’re selecting your rebate management system, to ensure that it’s possible to track who put what information in, when.
People can be very protective of their accounting excel spreadsheets. “Due to the nature of spreadsheets, they are usually owned by one person and we have seen on many occasions that spreadsheets are kept on a personal laptop,” says Zoe Cooke, Commercial Manager at Enable. Apart from the risk of data loss, this also creates high dependence on these key individuals who keep much of the information about how the accounting excel spreadsheets are configured in their heads. This should be of huge concern to any business who knows that these key individuals could leave, potentially without any notice.
Business continuity is often a key driver for moving away from accounting excel spreadsheets so that organizations can remove the dependency on these key people. “You also don’t want a one-person solution” says Zoe. “You have to make sure that your solution supports people internally and also external parties, if possible.” Good customer rebate management software does this by default.
- Translating deals from commercial to finance teams and transparency
Commercial teams are out in the field, agreeing rebate deals, and they pass the information onto finance teams to enter onto an accounting excel spreadsheet and you get a mis-match between what has been agreed and what has been calculated and there’s a bit of guesswork. For example, Heline shares an instance she came across when she was running through a customer’s current rebate process with both commercial and finance teams in the same room, “They realised they had misunderstood which branches were included in a deal and they had only been claiming half the rebate!” In this case the disconnect led to missed rebate. In other instances it can result in an over accrual, which is arguably even worse.
Acounting excel spreadsheets are a one-person solution, not a company solution. The information contained within an accounting excel spreadsheet usually needs to be shared and used by multiple people. Transparency is key. A good rebate management system will enable you to have that transparency so everyone can see what has been agreed and what has been calculated.
The fact that accounting excel spreadsheets are so easy to use and so ubiquitous is both their blessing and their curse. Often information is recorded and maintained in a number of spreadsheets with no automatic feeds into each other. Accounting spreadsheets usually have to be manually reconciled and manipulated to produce various reports at all levels in the organization. This means monitoring and auditing is limited due to the large amount of work that would be involved. Accounting excel spreadsheets also tend to be slow and when there is an error with a calculation it can be challenging to work out why the error occurred in the first place. It often results in having to rerun a report multiple times, which can take many hours if not days.
Since accounting excel spreadsheets are easy to use, when you move to an automated solution pick one that is also easy to use. One of the key things you should also check is whether calculations can be automatically run in the background, so that the earnings are waiting for you when you need them. It’s also good if you involve your end-users earlier on. It makes them feel part of the selection process, you get great feedback on the usability and functionality and you’ll see a lot fewer issues when you move on to using the system.
Next steps: find out how rebate management software can help you ditch the accounting excel spreadsheets
While this thorough blog post has covered a lot of the concerns of managing deals with accounting excel spreadsheets and the potential solution – rebate management software – it’s just a fraction of the information and insight we shared on the webinar.
Watch the 30 minute webinar below to get the full story on why rebate accounting spreadsheets are so risky.