Why spreadsheets are no longer the right tool in debtor management

Feb 17, 2022

spreadsheets-vs-software

Estimated reading time: 8 minutes

How do you manage accounts receivable? Still using spreadsheets? You are not alone. Many companies and organisations still revert to the old, familiar spreadsheet, especially Excel, for the follow-up of debtors.

Spreadsheets have long proved to be extremely useful instruments when it comes to keeping track of figures and data. But managing outstanding debts in this way has its limitations. You exclude a lot of possibilities and in particular, spreadsheets are not that flexible, efficient or automated. For example, you cannot look up customer history and the way to share information with colleagues is not self-evident. Collaboration increases the risk of errors.

Credit controllers need to be efficient with their time and therefore often focus on customers with the highest outstanding amounts, or accounts whose due date is furthest in the past. However, this way of working is reactive: solving the problems only when they are already too far advanced.

It is therefore not good debtor management. Do you really want to continue using this manual, time-consuming and error-prone process? Companies that exclude risks and think ahead are best advised to switch from spreadsheets to automated debtor management.

What you’ll learn:

  • The disadvantages of Excel and other spreadsheets
  • Discover why it is best to switch from spreadsheets to automatic debtor management in the cloud as soon as possible
  • Find out how automation can help you focus on the customer and work more strategically

Reducing risks

According to the European Spreadsheet Risks Interest Group, the reliability of a spreadsheet is essentially about the accuracy of the data being produced. Around 94% of spreadsheets contain errors.

It’s all too easy to make a typo in a spreadsheet, rows and cells are all too easy to delete, and formulas and links can be broken in an instant. Moreover, there is no real control over data entry. And that can have major consequences, as in 2012 when JP Morgan saw no less than six billion dollars go down the drain due to an error in Excel.

A better approach is to exchange data between a debtor management tool and a CRM, ERP or accounting system, which greatly reduces the chance of errors. If you still see an error, then you only need to adjust the information in the source program, and everything will be back in order after the next synchronisation.

An additional advantage is that duplicate work is avoided. After all, many fields are already filled in. Moreover, in ERP software, for example, you can set access rights for different users and keep log files.

Growing with the company

Spreadsheets grow and expand over time. New accounts and customers are added, and old ones must be deleted. New insights present themselves and new data needs to be added. But who do you designate as responsible?

The way that spreadsheets grow with your organisation is therefore burdensome. And what if your company grows very quickly? Then the spreadsheet becomes bigger and bigger, increasing the risk of errors or broken formulas.

It often happens that the person who drew up the spreadsheet at the time is no longer active in the department or company. And it may be that this person is the one who has set up the algorithm behind the macros and knows exactly how the data is generated.

An easier way to work and collaborate

Let’s face it: working in a spreadsheet is quite labour-intensive and not the nicest way to spend your days. Especially when we are talking about hundreds and thousands of lines and cells.

If you see in the spreadsheet that a certain action has to happen, such as sending an e-mail, a letter or making a phone call, then you have to create the task in a calendar or task list, and then register everything in the spreadsheet again.

And what if there are several colleagues working on the same spreadsheet? How do you coordinate the team’s workload? You cannot quickly see who has been working on what, so you are forced to create a separate column, for example, and keep notes.

These notes must be kept up to date consistently, or else errors and misunderstandings occur. For example, have we already sent this debtor a payment reminder? And what if the debtor has paid but the amount was wrong? How are you going to keep track of this and communicate it? What about complaints? You will find that the list of exceptions grows very quickly.

If a colleague falls ill from one day to the next, can you get another colleague to pick up the phone straight away? We know of companies that keep all notes relating to accounts receivable management in a shared drive, so that colleagues can quickly consult each other’s notes. Again: perhaps this is easy to keep under control when you are talking about a few dozen debtors, but it is not at all obvious when you have hundreds of customers.

And how do you coordinate with other team members and non-finance stakeholders such as management or the sales team? Are you going to give them access to the spreadsheets and notes as well?

Automated debtor management

Many aspects of debtor management are difficult to automate in a spreadsheet. You can’t perform actions within a spreadsheet, anyway, let alone send reminders based on a certain automatic procedure and with an appropriate template.

Many companies therefore take the decision to implement automated debtor management, and by extension order-to-cash. Credit controllers then have complete control over their workday via procedures and workflows; they maintain an overview of customers and management reports are generated without any trouble.

Besides, companies can no longer avoid AI and data – they have become crucial in business processes. With automation, a lot of data can be processed and presented to employees in clear language. Instead of credit controllers having to go through thousands of cells in a spreadsheet, they can now, with the right debtor management software, better identify trends in the abundance of data. For example, patterns in customer payment behaviour.

Automation frees up time so that teams can focus on investigating irregularities. The shift from manual tasks to more strategic responsibilities can vastly improve workflows. And accounts receivables managers can get back to doing what really matters: communicating with customers and collecting payments efficiently.

Reports

Spreadsheets are designed to store data. If you use them for a different purpose, the outcome will often be less than the ideal you hoped for. Not least with reports and statistics. It is perfectly possible to extract data from a spreadsheet and present it in reports and graphs, but it is not easy or intuitive. Certainly not when the amount of data is enormous.

It becomes even more difficult when, for example, managers and CFOs want their own reports and statistics. They don’t want to sift through dozens of spreadsheets and worksheets to extract vital information and KPIs. They only want the information that is relevant to them. For the finance department, it is quite a job to make a summary for all these different stakeholders. In which case, it is better to use business intelligence software.

To extract trends from the data, you have to combine these data at different points in time. In practice, this quickly means even more worksheets, columns and rows. How, for example, do you mention the payment behaviour of debtors in a spreadsheet?

And how can managers coach and monitor the credit controllers in a spreadsheet? How can managers see the daily actions of employees so that they can make adjustments?

Registering complaints

One of the reasons why invoices are sometimes paid late is complaints. The product has not been delivered correctly, one or more products are missing, goods are damaged, or people are not satisfied with the services provided.

Dispute management, as we call a system for managing complaints, is in fact a separate branch with its own finer points and ways of working. You often need to find out where the fault lies, both internally and externally. How can you register all these interactions in a spreadsheet?

More quality through integration

With spreadsheets, there is no standard integration with business systems. If you want to combine a spreadsheet with other systems that your company uses, you will have to see if you can set this up using integration solutions such as Zapier. Otherwise, you have no choice but to work out a data link yourself.

With the right software for debtor management, you can reuse the data that is already present in your IT infrastructure (accounting, CRM, ERP etc.) so that the data quality is better. You can also add external data such as trade information or credit scores relatively quickly.

Internationalization

If you have to work with different currencies and tax regimes in a spreadsheet, you’ll soon run up against the limits of the tool. Forecasting, budgeting and reporting immediately become a lot more complex.

Large data sets

Excel has a limited ability to process large data sets, which causes processing times to rise sharply. The limit in Excel is one million rows. If, for example, a .csv file is opened with more than one million rows, the lower rows are automatically cut off and are not shown. This led in 2020 in the UK to the disappearance of 16,000 Covid test results. In a database, by contrast, millions of rows and columns are possible.

No real-time data in spreadsheets

Spreadsheets do not provide real-time data. They only provide an overview of the data for a given moment in time. Updating a spreadsheet must be done manually. This may be possible via an import from other systems, but the data must fit into the current spreadsheet.

And today, real-time data is crucially important for every company’s decision-making process.

Conclusion

Spreadsheet errors and inaccuracies are one of the main reasons for switching to a dedicated application. Financial teams cannot afford mistakes. Making wrong predictions because an error has crept into the underlying data is simply not acceptable and can do serious damage to the business.

Automation frees up time in the daily workflow to focus on the customer and to work more strategically as a credit controller. Moreover, an app is much more flexible, and to some extent future-proof.

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