One morning in 1996, I crawled out of bed at 5 a.m., walked into the bathroom and glanced in the mirror. I didn’t like what I saw. At 46, 11 years since I’d first set out as an entrepreneur, I looked far more than a decade older. I was fried—overworked and drowning—ready to walk away.
At that point in time, Foundation Software was just a 16-person software company with about 350 clients. Rather than keeping myself to one or two tasks, I was in charge of marketing, sales, program design and quality assurance, as well as handling employee and client issues. I had no management systems in place. I didn’t even have a voicemail system set up. I’d built an entire company around doing everything myself because that was the way I’d always done it, but that morning was a turning point for me and, consequently, the company.
I decided that I didn’t have to keep doing it my way. I was finally open to change because I realized that my method was not working, and I was miserable. I could invest all my time and money in management programs or seminars, but, at the end of the day, I wasn’t management material. So, I took a step back and reevaluated. Then, I hired my first president to handle the operations side of the business. Finally, I was able to focus on what I did best, and the company grew.
In assigning every task to myself, I was limiting both my company and me. I was miserable because I’d set up a system that felt impossible to maintain, and, if you don’t mind the old saying, I couldn’t see the forest for the trees. It’s ridiculous to expect one person to perform every job in a business, and it’s the same for spreadsheets. They do have limitations, which appear when you push your spreadsheets to do more than they are meant to. Recognizing those limitations and seeing how they can point to bigger issues within accounting and reporting processes is incredibly important. Spreadsheets aren’t really the problem; they’re a symptom.
Every problem starts simply. Spreadsheets are flexible and straightforward on the surface, but they’re also familiar. JBKnowledge’s 2017 Construction Technology Report states that 59 percent of the construction industry relies on spreadsheets to run their business every day. They’ve become a stand-in to help fill the gaps in accounting applications that do not meet the demands of the construction industry. The problem is that using spreadsheets to do accounting, estimating, scheduling, project management and more is redundant and time consuming, usually requiring someone to manually enter in all the data. Not only is this a poor use of labor hours, it is prime ground for human error. This only gets worse as time progresses, because as a company grows, its data grows, and the spreadsheets grow to keep up.
Eventually, companies can have numerous spreadsheet “islands” full of disconnected accounting data. Information that should be linked is separated out across multiple spreadsheets or workbooks. It becomes impossible for the people working on these “islands” to know who has changed what—whether information is correct or the numbers are outdated. While powerful, spreadsheets are fragile. One accidental cell or formula change can lead to errors that ripple throughout the entire file and cost the company in the long run. The spreadsheets cannot be blamed. The fault lies within the misuse of, not the spreadsheets themselves.
Technology only helps if it leverages something you already do well (the people and processes you already have in place). Accounting and spreadsheets are no different. Problems begin to surface when companies outgrow them for their data management, job cost tracking and reporting or when they already have process issues that aren’t being addressed, which is why you read so many articles prompting you to leave spreadsheets behind and invest in new construction-specific software. However, buying new software is not going to help if you don’t already have healthy accounting processes and teams in place to properly use it. In fact, adopting new technology you aren’t ready for is likely to accelerate your problems.
With teams and a clear system in place, whatever the size of your company, spreadsheets can be an excellent supplement to software that is already working for you. For example, if you have small enough billings that you can still use small business accounting software, you might find that you need just a little extra help tracking job costs. In that case, a spreadsheet program can allow you to manipulate and report that little bit of additional data. If you use construction accounting software or a bigger enterprise resource planning (ERP) system, there might be advanced custom reports you want to pull directly from your software database, but in no case should your spreadsheets be your entire database.
Spreadsheets should be working to save you time and simplify processes. The following are a few different ways you might use them in your accounting processes.
- To help with performing complex calculations—Spreadsheet programs aren’t just a static table. They’re essentially a giant, powerful calculator. Whether you’re creating a series of depreciation schedules or playing with a time-and-materials worksheet, spreadsheets can crunch numbers, not just from other cells but from other locations in your workbook—even other software.
- Pull in data from your accounting software using queries—Instead of relying on spreadsheets as your database or manually reentering numbers, queries retrieve data from your accounting software. You might find that a report you want, such as a particular cost analysis, isn’t available in your software. Queries can define a new relationship between the tables in your database. The numbers live in your database, but the spreadsheet is where they meet.
- Manipulate your data with pivot tables—With data in your spreadsheet, you can use a pivot table to sort, count, total and summarize data. Take that custom cost analysis report for example. You can easily change how you break out your cost classifications and total a crew’s average pay rate for your job.
- Safely make forecasts and projections—In addition to financial scheduling, using spreadsheets can also allow you to model future figures without mingling fact and fiction in your real-world database. Rather than recording hypothetical data in your software, you can rough-in numbers outside of your database to estimate new production activity and estimate next year’s financial picture before moving into a new tax jurisdiction.
How you use spreadsheets in accounting is dependent upon your needs in relation to the other financial and job costing software you’re able to use effectively. The bottom line is that there will always be a place for spreadsheets as long as they are not your main software or forcing you to spend excess time making them work.
If you are running into a problem with your spreadsheets, take a step back and ask yourself why. How did you get to this point? What is preventing you from pursuing a solution? It might be resistance to change. It might be the need to champion new technology. If you’re like me, the problem might be you.
Spreadsheets are a tool and, like any other tool, they have their place in your business, but you must make sure you are in a position to get the most out of the right tool for the job. Whether that means upgrading your software and data systems, talking with software vendors to make sure you are using your software to its full potential or working with a construction CPA or business advisor to evaluate your accounting processes, choose whatever resource is best suited to help you get back to focusing on what’s most important for you and your business.