Q.  Outgrow Spreadsheets Yet?
A.  Probably.

Spreadsheets are widely used in business but have outgrown their original benefit – increasing an individual’s productivity.

Their use has crossed over to become the de facto financial tool for ‘all things numbers’ including expense reporting and invoicing including billing clients for services and project expenses. A major challenge is the spreadsheet no longer represents an isolated tool but rather is shared and moves through an entire workflow involving multiple business units, processes, and often used to bill the client. The Professional Services and Consulting industries rely heavily on spreadsheets – perhaps more so than other types of business. Every aspect of the project is tracked incrementally including client-project associations, hours, travel expenses, and project supplies and materials.

Cloud applications on the other hand optimize specific processes including expense reports, invoicing, and many others. This blog explores the use of spreadsheets in Professional Services, Consulting, and similar types of organizations and why cloud applications are exponentially better suited.

Cloud Applications Optimized for Purpose.
Always.

Cloud applications are designed inherently to automate aspects of a process that are either manual or error prone.  Two processes often improved in accounts payable (AP) are data entry and workflow.  Let’s compare each of using a typical consulting company to illustrate.

Spreadsheet Data Entry is Brutal.
For Everyone.

There is no getting around the volume of data required for tracking billable expenses and if it’s manual, it’s time-consuming for everyone; not just the consultant; not just the accounting group; everyone.

Consider that every purchase related to the client and project requires tracking. At a minimum, the consultant must enter the expense type, date, amount, and payment type such as cash or company paid credit card, and then associate to a client and project. Often there are other details such as a description of the purchase, the merchant, and purchase location.  This is a significant amount of manual data entry that takes time and is prone to error. The expense report –  in this case the spreadsheet – is a source of truth for the spending process.  Mistakes here are often missed later and magnified throughout the workflow.

In contrast, cloud applications offer several ways to automate data entry so there is little, or no, data entry necessary.  For example, these applications use the data found in travel bookings, credit card transactions, and, via optical character recognition (OCR), paper receipts to automatically create expenses with this data.  This not only eliminates manual entry, but also improves the data integrity by reducing errors related to the manual process.

Who to Bill?
And How?

Central to this process is associating an expense to the client and activity or project. Spreadsheets address this by requiring consultants to organize expenses into piles of receipts by client activity, then create a spreadsheet for each pile.  Consultants then enter the expenses from each pile into its spreadsheet.

Organizing expenses can take a lot of time, especially for consultants who regularly visit multiple clients during one trip – a common practice to leverage time and travel expenses. Splitting an expense across multiple clients or projects adds manual steps including copying the receipt and often creating a separate spreadsheet dedicated to the other client and activity.

Cloud applications offer both automation and flexibility for this task often connecting directly with the Project Accounting application that is the source for client activity records.  Consultants select from these records to associate one or more expenses to a client activity.  This takes only moments, and avoids the need to first organize expenses by client or project.  Further, cloud applications make it easy to split one or more express across multiple clients or projects.

Required Receipts.
Multiplied By …

Most clients require receipts as the backup documentation that proves the expense. Most organizations using spreadsheets handle this by having consultants send the paper receipts for their expense reports to Accounting.  In turn, Accounting copies or scans the paper receipts and organizes these into groups by client to bill or expects the consultant to perform the tasks. Either way, that’s additional time spent on data entry.

Cloud applications can automatically create receipt images, and attach these to their associated expense.  This not only saves data entry time, but also ensures each billable expense has a receipt image.

Approval Routing.
Ideally Happens Once.

With spreadsheets, the approval routing happens via email, where each person in the workflow must decide who to email the spreadsheet next for approval.  This relies upon approvers to monitor their email inbox, remember to review reports pending their approval, and – in the case of policy enforcement – knowing who the next approver should be if the expense is out of compliance.

Because it’s manual, the integrity of the approval process relies upon people to correctly include all the approvers required to properly review the expense report.  It’s easy to miss an approval, or to select the wrong person for an approval.

As such, the last person in the workflow – the auditor – must carefully review the email thread to ensure all the necessary approvals are in place, and if correct, manually record this thread in some system of record.  If not, the auditor reroutes to get the required steps completed and documented.

Cloud applications route approvals automatically based on business rules that look to any number of criteria including the expense type, amount, and policy determining who needs to approve the report.  Approvals are tracked, reminders sent, and an audit trail is dynamically created.

Productivity Equals Profitability.
Especially for Professional Services and Consulting.

Cloud applications – like spreadsheets at the time of their introduction – enable productivity gains not possible with the earlier methods.

While all organizations crave such productivity gains, Professional Services and Consulting organizations have a heightened reason to trade in older disparate processes in favor of cloud offerings.  Their cost of doing business and thus their profitability is tied heavily to expense management from spend to client billing.

The decision to trade in spreadsheets for cloud applications is an easy one when considering the time savings, reduction in errors, and cash flow improvements.