The status quo of spreadsheets may no longer be the best solution for your commercial real estate (CRE) finance team. Yes, you read that correctly. We understand that spreadsheets have been the “go-to” tool for many organizations for nearly 40 years. The problem is that 9 out of 10 spreadsheets contain at least one error. (Translation: your finance data more than likely contains a mistake.) Further, they are subject to human error, can be easily altered, and often lack internal security measures to prevent data breaches. Still, 88% of respondents to a recent study use more than 100 spreadsheets to support their critical business processes, like CRE asset management.
According to Gartner, business decisions informed by outdated or inaccurate data can cost small to mid-sized businesses over $15 million per year. Simply put, spreadsheets can pose significant finance risks for your organization.
The combination of ongoing market shifts, CRE’s technological disruption, and increasing knowledge around spreadsheet risks has created demand for modern CRE tech solutions across the firm. Today, finance teams can avoid Excel gymnastics and escape the limitations, challenges, and risks of spreadsheets with asset management solutions, like Lobby CRE.
But first, what are the finance risks involved in relying on spreadsheets? And how can they impact your accounting team (and the business)? Read ahead to find out.
Risk #1: Financial Data Inaccuracies and Errors
Poor data quality is a major risk for Finance teams that use Excel and other similar tools. Spreadsheet inaccuracies and errors can appear in the form of broken links, missing or incomplete data, incorrect formulas, and more. Human error is the cause of many of these mistakes. Whether small or large, incorrect numbers can skew key metrics such as your income and expense data, NOI, and other critical operational data.
Risk #2: Lack of Data Security
In a survey of 300 CFOs, VPs of Finance, Controllers and other executive-level finance professionals, 88% of respondents expressed concerns of being hacked (and for good reason). Finance departments are amongst the most vulnerable teams within an organization because they have access to confidential proprietary and client data. This data can include banking information, social security numbers, and other classified info. If this sensitive data is exposed, the company could face serious consequences including loss of revenue and data and a tarnished reputation.
Finance teams that access, store, and share financial data within spreadsheets are at risk of cyberattacks. That’s because spreadsheets contain no log of record to track who shares the file, when it’s shared, and to whom it’s shared with. Because of the lack of security, spreadsheets can be printed, photocopied, or unsafely shared, further exposing your financial data to potential threats.
Risk #3: Siloed Financial Data
According to market research firm IDC Market Research, companies lose 20-30% in revenue every year because of inefficiencies. Siloed data can slow down financial reporting and create other organizational inefficiencies. Plus, siloed data means there is no way to keep up with which version of the data is the latest and most current.
For example, the Property Manager and Asset Manager may use separate spreadsheets to track and manage property and financial data. Because the accounting team does not have access to either of these spreadsheets, they can’t ensure the formulas and data across both datasets align.
Risk #4: Slow Financial Reporting
Producing timely financial reports can be time-consuming, especially when manual data entry and analysis is involved. Manual financial reporting places heavy demand on your team’s time and resources. Manual financial reporting requires significant time commitments since staff members must source and input financial data from a variety of platforms and then validate that information for accuracy. In fact, most CRE teams spend 15-25% of their time manually managing and organizing data. Further, 72% of Finance teams spend as much as 10 hours per week on manual Account Payable (AP) tasks like keying invoice data, shuffling paper, fixing errors and mistakes, and chasing down information.
Additionally, financial reporting is slowed when finance teams have to wait to receive the information for their reports from other personnel. By the time the information is shared with accounting, a reactive approach to fix data and input errors is often required. Having to backtrack to fix errors wastes time but is necessary to prevent additional issues down the line.
Risk #5: Lack of Data Standardization
For some commercial real estate teams, financial and accounting data is scattered across several spreadsheets and multiple systems and may be in a variety of formats. This scattered, inconsistent financial data is a breeding ground for financial risks.
Having decentralized data means that teams may be working from differing datasets that have unstandardized formatting and formulas. Non-uniformed information creates inconsistencies and inaccuracies in your financial reporting. On the other hand, data standardization improves accuracy and ensures that your decisions are based on correct, up-to-date information.
How Lobby CRE Can Help:
Lobby CRE serves as a single source of truth, eliminating disparate financial data and ensuring your team can access pertinent information when they need it – and have confidence that it’s accurate. With cloud-based technology, Lobby CRE ensures all of your data is securely stored in one location rather than sitting on someone’s desktop (or desk).
Additionally, Lobby CRE’s automation capabilities can help you standardize reporting, uncover deeper insights, and navigate changing business requirements. A centralized database and automated reporting processes frees up time that can be dedicated to value-add activities to drive cash flow and streamline your CRE asset management.