Why do businesses still use Excel to manage key financial processes?

Expend Team

09 December 2020

After our very busy and successful 2nd Xerocon last week, we had the pleasure of talking to hundreds of tech-savvy accountants about our award-winning expense management solution and our seamless Xero integration. However, one thing stood out, and that was the number of people that admitted (often shyly) that they still use Excel to manage their expenses and other key financial accounting tasks.

So I thought we should take a step back over a brew and have chat with our CEO, Johnny Vowles about why businesses are still using a tool that’s over 30 years old.

Q: So why are businesses still using Excel to manage key financial processes?

JV: It's worth looking at the history, Excel was released by Microsoft on Apple machines way back in 1985, two years before it was released for Windows. Excel wasn’t the first spreadsheet program either, but it’s the one everyone remembers. Such was its success, people say Excel, when they actually mean a spreadsheet. That's pretty much the same as saying, Hoover, when they actually mean vacuum cleaner.

It's fair to say that Excel has helped to transform the world of business and accountancy, one cell, row, and column at a time. It caused a huge amount of disruption, and became so all-pervasive in the business world you'd be the incompatible anomaly if you didn't work with it. Leaving something so trusted and deeply ingrained behind is difficult for many, because, for all its pros and cons, it's like an old pair of comfortable shoes. People fear the retraining required for new software, the consequences if it doesn't work, and the initial costs to change all their systems and legacy files over to the excel replacement.

Q: Why are companies still using Excel to manage budgeting, expenses, and reporting, or have they moved on to more bespoke tools?

JV: Employees around the country still go through the tedious practice of manually printing off Excel spreadsheets and attaching their receipts to reclaim on monthly expenditure. It’s slow and ineffective yet it remains the norm, despite there being simpler options available. The research that we commissioned OnePoll to conduct found that more than a quarter (28%) of UK employees’ biggest annoyances when dealing with their expenses is having to manually collate receipts every month.

Excel, in particular, is one of the most commonly used/misused professional software tools. Its handy grid format and the ability to create formulas, charts and a host of other features has engendered a global cultural phenomenon of thinking “we’ll use Excel for that”, when there are in fact more relevant solutions for the vast majority of functions required in financial reporting and planning.

Perhaps the biggest reason for Excel being so widely used is down to it being installed as standard on most employee machines, so naturally, it's one of the most accessible tools. Once something is the standard, it's all too easy to rely on the overused excuse: "organisational change is hard".

Q: What's wrong with using Excel, especially since it's already there and saves the company money on buying other tools?

JV: Saying that Excel saves businesses money is actually a false economy. While true, the money spent on software is less, the productivity levels and the company visibility of what's being spent, are heavily impacted. Saving an employee as little as an hour every month on expenses admin will save the company more than the cost of tools like Expend and that's before you take into account the added cost of finance team support, accountants and bookkeepers, and so on.

Excel can also prove to be a frail tool in many cases. It only takes one minor error in a formula or a cell to unintentionally falsify the calculations across a whole sheet. Take Marks & Spencer, whose CFO, Helen Weir told The Financial Times she was shocked to discover that a spreadsheet summing error forced the retailer to issue a major correction to its quarterly trading statement.” Ouch.

Q What are the signs that a business might have outgrown Excel for these processes?

JV: We often hear from our customers how their expenses processes were costing them time and money, with outdated software being the root cause. Expenses remain a regular issue for employees in businesses of all sizes.

Our research showed that the country's 32.40 million people in employment collectively spend 548,038,800 hours completing their expenses in work time every year, with 21.5% spending nearly half a working day or more per month on their expenses.

Frankly this is time (and therefore, money) wasted on a manual approach. The time that could be better spent helping to get other more important work done, especially at the end of the month when most workers file expenses.

Q: What are the issues and challenges facing small businesses that are using Excel? E.g. admin headaches, reconciliation issues etc.

JV: The administrative headache tends to fall on the business owner or long-suffering accountant - especially in smaller organisations. Despite the fact that their time would be far better spent on other things - such as creating products or winning new business. The financial impact of many employees claiming expenses at the same time can significantly disrupt cash flow - especially if you have little idea what has been spent until the expense report is submitted. This can, and does, make the difference between the company remaining in the black or needing to take out a business loan to keep afloat.

For employees in smaller businesses, unsatisfactory expenses procedures are still a big deal. Our research found that over a quarter (26%) said a poor expense policy would have a negative impact on their job satisfaction, while 31% would feel less likely to recommend their place of work due to poor expenses processes. Not only that, but the business is quite literally paying for these inefficiencies - some finance personnel have reported spending days processing company expenses. That's hours of wages wasted on low-value tasks.

So Johnny, what are your top 'stop using Excel' tips?

1) Invest in your employees' wellbeing: Organisations of any size, not least smaller ones, can’t afford to forfeit this time on logging muddled expenses. Modern technologies like Expend, Slack, Trello, and Zapier are increasingly becoming seen as 'standard' by professionals, especially the younger generation. Employers holding on to outdated software and processes will likely lose staff to organisations that are quite literally moving with the times. Very few people enjoy admin, even less so when they feel they have to do it in their own time. Holistically, the cost of improving the working lives of employees with inexpensive technologies is far less than the cost (and hassle) of replacing them if they decide to leave.

2) Likewise, listen to your employees: Understandably, you may not want to ask every employee what tools to actually use. As they will likely all come back with different answers. But you could ask them which parts of their job or processes they dislike, what software they hate using, and why. Don't forget, when you're using internal software, the employee is the end-user and thus, in some respects, your customer.

3) Streamline your processes: Streamlining outdated processes has plenty of benefits. It can free up valuable time and increase productivity & transparency. In the case of expenses, it improves cash-flow management and can aid in key decision-making. Furthermore, the excuses for not streamlining expenses (or other) processes get thinner by the day. Especially now it's so easy and quick to implement - thanks largely to the potent combination of smartphones, cloud services, and a hyperconnected world. 

4) Look in the mirror: Be honest. Would you tolerate your current process in your personal life? If the answer is no then something needs to change. The wave of b2b2c business solutions addressing internal working practices means employees increasingly expect their work tools to be as good as those they use personally.

5) Escape the “let’s use Excel for that” mindset: Don't get us wrong, Excel is an extremely useful tool, and has served businesses well for decades. Its abilities are almost unlimited, seemingly restricted only by the individual's imagination. However, just because you can use it for something, it doesn't mean you should.

Q: Any last thoughts?

JV: I wouldn't recommend going overboard and signing up for countless Excel alternatives to solve individual financial tasks. Quality has always trumped quantity. To ensure this, it's key to first analyse which tasks and processes will offer the most ROI (perhaps using the Pareto principle) before you can choose the best tools for the job. Making sure the tool is flexible, accurate, and easy to implement & use will ease its adoption.

It's why we're modernising the expenses process - it doesn’t need to be a huge hassle. We know Expend will save time and money and give employees and the business a competitive edge. It's why hundreds of businesses have already chosen to give connected Expend payment cards to their employees - as well as a faster, more transparent process for out-of-pocket expenses. It's not just employees though, management benefits from real-time data, easy approval workflows and click-free instant syncing with Xero and QuickBooks.

Expend Team

Taking over the world, one expense at a time

Powering businesses around the world with the ultimate expense management software and sharing our top tips and lessons through these blogs.

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