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Compliance Causes SMBs To Reduce Spreadsheet Usage

Financial executives in small to mid-sized businesses plan to dramatically reduce their reliance on spreadsheet-based accounting processes, according to a survey of 118 business leaders conducted by RevenueRecognition.com and IDC.

SMBs commonly rely on spreadsheets to perform key accounting processes, however, many businesses plan to move to more automated systems that offer tighter internal controls as well as greater transparency and insight into their companies' financial health. Even privately held organizations not bound by stringent government regulations, such as Sarbanes-Oxley consider automation a major initiative in the next 12 months.

According to the survey, 80 percent of respondents indicated that they believe spreadsheets should not be the foundation for critical accounting processes.

"It is clear that spreadsheets play, and will continue to play, a role in the analysis and reporting of information, but are not the basis for auditable accounting information and related processes," said IDC research director Kathleen Wilhide, in a prepared statement.

Those responding to the survey were particularly concerned about several key tasks. Forty percent fewer expect to be using spreadsheets for closing the books. Companies also plan to reduce spreadsheet use by nearly one-third for tasks such as reporting, forecasting and handling deferred revenue. Similar drops are seen in the areas of revenue recognition, budgeting and planning, and billing schedules.

When asked what risks are associated with spreadsheet-based processes, 63 percent pointed to the fact that they are prone to errors, 58 percent cited the lack of audit trail and 56 percent said they lacked internal controls. Only five percent claimed that no risks existed.

Companies surveyed found it substantially more difficult to establish internal controls in two key areas: Thirty-six percent indicated revenue recognition accounting was most difficult, and 29 percent pointed to contract administration and management. Other areas such as purchasing and payables, inventory, fixed assets, order processing, billing and accounts receivable, payroll, treasury, and general ledger rated no higher than eight percent.

"An important change is taking place in terms of how finance organizations are automated," said Gottfried Sehringer, executive editor of RevenueRecognition.com, in a prepared statement. "This change, even among privately held companies, is largely being driven by government regulations such as Sarbanes-Oxley. As they consider possible mergers and acquisitions, or even going public, these regulations come into play and executives want to be sure the books are in proper order."

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