Since 1985, Microsoft Excel spreadsheets has played an integral role in most companies. It is often used as a standard tool for business tasks, especially for small businesses and start-ups. Key task examples include managing finances and back-office operations like inventory management. It is probably not a stretch to say that the vast majority of small-to-medium companies use Excel to track their inventory, rather than purchase an inventory management software.
As you grow your business, Excel's features will not be robust enough to keep up with the increasing requirements of your business. Increasing customer orders and inventory movements will put a strain on Excel's limited capabilities when it comes to inventory management. As a result, you will find yourself spending more and more time maintaining spreadsheets. Ventana Research found that users spent 18 hours each month maintaining spreadsheets. This inefficient workflow could be a strain on your business's valuable time and resources.
Here are four reasons why Excel could be detrimental to the growth of your business.
1. High Error Rates
88% of spreadsheets have errors. Manual data entry to spreadsheets is the primary source of these errors. For example, someone might key in the wrong information to a cell, or place data in the wrong column. Spreadsheets themselves are not solely the issue. Instead, it is the “human error” component, where a person is entering incorrect data into a spreadsheet. Also, the chance for an error rapidly increases when data is handled by multiple users and stored across multiple worksheets. One mistake can cause a ripple effect across a business’s entire operation.
Applying a watchful eye to key output data can help you prevent errors. Adding checksums and checking subtotals one or two different ways will help even more. If you are fortunate enough, you will realize your spreadsheet has a mistake. However, you probably spent a significant amount of time and resources to manually trace data through your Excel file to fix the mistake. Trust us; we have been there.If the errors go unnoticed, you could lose business opportunities. Worse, you could experience a cash flow problem due to inaccurate inventory planning. One single error in a spreadsheet can be extremely costly to businesses. Case in point: JP Morgan lost six billion dollars when a cut and paste error in a spreadsheet caused a risk model to be incorrect.
2. Lack of Real-time Information
While Excel can help you in data entry and analysis, it is not able to capture the daily trappings of your business without much help. A spreadsheet is not aware of orders coming in or goods changing hands unless that data is entered in by a human.
In most companies, different departments require the same pieces of information for their operations. For example, both the production and the finance team would need incoming sales order data to understand what inventory is required, to fulfill orders and to determine the value of the inventory on the balance sheet, respectively. If one department was planning their activities based on new order data but did not update the respective spreadsheet, the other department would be using outdated data for their operations, and the error could disrupt their business workflow.
The accuracy of your data is entirely reliant on you or your team diligently maintaining an up-to-date spreadsheet. From our experiences, updating a spreadsheet accurately once a day is very high performance, and unattainable by many. However, this is still nowhere near real-time.
Real-time information is vital to your growing business. It provides an accurate view of your business's operations when you most need it: “now.” Without a clear picture of your current performance, you may have a difficult time forecasting sales or planning your purchasing.
3. Insights are Difficult to Come By
It is challenging to analyze and gain quick insights from Excel spreadsheets. Organizing and working with data in Excel requires skills that many do not possess. Without the skills and expertise, generating an insightful report from an extensive amount of data can be time-consuming. To collect data and gather insights on your business, for example, re-order points or safety stock calculations, you likely need to link different datasets, clean data in a programmatic manner, calculate averages and sums, and potentially use pivot tables and complex, formula-based models (INDEX MATCH MATCH anyone?). For small business owners, even if you have the skillset, spending the time to create these analyses may be a poor use of your time.
Easy-to-use analytics and reporting features are critical to understanding where your business is doing well and what needs to be improved. If you have a solution that generates insights and opportunities automatically, based on your data, you can respond to changing market conditions faster than your competition. Relying on Excel for those insights will cost you time, money, or both.
4. Who Has The “Master” Version?
Most people use Excel as a locally installed application. Google Sheets and Excel Online are great alternatives for collaboration. However, most business users still prefer to use Excel on their PCs and save important spreadsheets to a local or server-based folder. As a result, this makes it difficult for different members of a business to edit or view the file collaboratively. Users needing to upload information to the system have to wait for their turn to input their data, or perhaps will create a different version temporarily. Waiting can be frustrating and time-consuming. And when multiple versions of the same file are produced and distributed across an organization, the chances for mistakes rise quickly.
Worse yet, data recovery will prove difficult if simple verification of the most recent, up-to-date information is not possible.
So What Should I Do Next?
If you are a small business owner and looking to use Excel for inventory management, or other back-office tasks, you may yet have the skillset and ability to thrive. For most, we would highly recommend leveraging technology. There are a number of affordable solutions available to help you manage your inventory. For small-to-medium wholesale businesses, Sweet is the leading solution. As a cloud-based software-as-a-service product, Sweet helps eliminate errors, provides a real-time view of your business, and surfaces automated insights and reminders to help you grow profitably. Sweet features integrations with accounting and fulfillment applications, automated invoice and packing slip generation, and real-time reports. Our number one goal is to help you streamline and automate your business operations.
While this might seem a costlier alternative than using Excel, in the long run, the time and money saved by using Sweet will far outweigh the money saved from persisting with Excel, not to mention the reduced costs of avoiding mistakes and inputting/managing data with Excel.