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On October 17, 1979, the modern spreadsheet was born. On that day, the program VisiCalc was first shipped ushering in the age of the spreadsheet for the personal computer. For that reason, October 17 is annually ‘celebrated’ as Spreadsheet Day. Spreadsheets, and the programs dedicated to their use, have run rampant through the business and financial world.

The flexibility of spreadsheets allows them to be used, whether appropriately or not, in many different ways – which is why they can be such dangerous documents on which to rely. The construction industry is especially fond of turning to spreadsheets to take care of “technological” needs, and as a result, is particularly vulnerable to the pitfalls related to such a dependency.

Construction Industry and the Love of Spreadsheets

The construction industry’s reliance on spreadsheets, and therefore, the abundant use of Microsoft Excel has resulted in the industry is slow to adopt new and more specifically adapted technology. A recent survey by JBKnowledge outlined the construction industry’s heavy reliance on Excel related to more targeted and appropriate technology.

That survey discovered that, while most construction companies use some sort of accounting software, the vast majority of those companies are using software that doesn’t communicate with their other programs, and fully one-third of the 85% of construction companies using an “accounting software” are only using Microsoft Excel. This means that over 25% of construction companies only use spreadsheets to manage their accounting. This is a dangerous proposition. Likewise, the construction industry use of Client Relationship Management (CRM) Technology use is similarly proportioned. While only 21% of the construction companies surveyed use CRM technology, one-third of those that did use only Microsoft Excel. And, finally, the monitoring and tracking of receivables (outside of pure accounting functions) and the related security rights and related laws are also often tracked via spreadsheets.

Spreadsheet Limitations and Dangers

While Excel is a useful product, it’s the wrong tool for construction financial managers – especially as it’s being forced into a de facto platform, a function for which it is not designed. Among other issues, it’s too general, it’s not collaborative, it results in multiple spreadsheets with no ability to tie that data together, and in some cases, there is just too much data to reliably and consistently track with a spreadsheet (or, at the very least, that can be practically used via spreadsheet).

These limitations are compounded by the fact that spreadsheets also provide opportunity for errors, and as the size of spreadsheets increase, so does the possibility that one of those errors will actually occur. In fact, examinations of spreadsheet use have uncovered a frightening prevalence of errors, and these errors are not limited to small mistakes. While many mistakes are minor, spreadsheet errors, miscalculations, mistyping, and mismanagement has resulted in errors of more than $100 million, and to things like a reiteration of financial forecasts by a large global company.

CFMs who rely on spreadsheets to track and manage A/R and security rights can be placed in a similarly error-prone environment. The rules and regulations related to security management are complex, difficult, and routinely modified. Just keeping track of the parameters of the spreadsheets can be time-consuming and easy to mess up. Additionally, the information contained within the spreadsheet fields themselves can represent potential problem areas. With no innate dynamic ability, or the ability of the spreadsheet program to communicate with other platforms, failure to or mistake in modifying or initially filling out the spreadsheet fields can have dramatic effects on security rights, with no ability to know and/or correct.

Lose the Spreadsheet – Gain Knowledge and Control

Knowing how ditching the spreadsheet can work to a company’s benefit is best approached through an examination of what spreadsheets are used for, and how those functions can be helped by better and more focused technology.

  1. Many companies export their aging reports each week into a spreadsheet, and then the staff will follow up on all of these accounts and track their progress in Excel. Decisions about who to call and who to collect from, are all based on an Excel document, and successes will be tracked based on that document.
  2. Tracking security rights (lien deadlines) with Excel is impossible in practice. Companies that understand monitoring security rights and associated deadlines is important routinely want a “cheat sheet” showing all of the lien deadlines. It’s unfortunate, but this is just not something that can be provided in any manner that would be efficient and reasonable to use. The rules and requirements are complex enough that Levelset has spent years building a database with tens of thousands of cross-referencing entries mapping out the lien laws – this is too much intricate information for a spreadsheet “cheat sheet.”  Despite this, however, many credit, collection, and financial professionals “track” their lien deadlines and lien requirements using some Excel form.
  3. Companies try to export and send data via a spreadsheet. This is inefficient, especially as compared to the option of integrating systems through an API. Specialized and targeted software platforms like Levelset, and other new construction technologies allow companies to connect via API, making data transfer seamless, automatic, and error-free. Nevertheless, many companies opt to “export” their data to Excel and send that spreadsheet to third-party services, and sometimes even manually prepare spreadsheets to send. There are many problems and inefficiencies with this, and the investment from IT to connect to an API is quite low.

Ditching the spreadsheet for an integrated software platform can transform receivables management, security management, and credit management as a whole. Rather than forcing a product to wear hats and perform tasks for which it was never intended, and in the process open the door for errors, the use of specialized, targeted, and efficient technology just makes sense. Cloud-based platforms allow the seamless, easy transfer of data, are dynamically updated, allow for ease of use, and are linked to databases with enough information to accurately manage that tasks that they are trying to do.

This spreadsheet day, CFMs should celebrate by giving the spreadsheet a break and using technology designed for the specific jobs at hand.