No company or startup can maintain a positive cash flow position without efficiently tracking and processing upfront and recurring expenses. Most companies manage various types of expenses efficiently by implementing feature-rich expense management software. But some small businesses and startups still use expense spreadsheets to save money.
These businesses record and track expenses using widely-used spreadsheet software solutions, such as Microsoft Excel, Google Sheets, and Apple Numbers. But employees and accountants have to ensure the accuracy of expenses by identifying and fixing common expense spreadsheet errors. We are discussing some common and recurring spreadsheet errors and their impact on a business’s expense management process.
Understanding 7 Most Common Expense Spreadsheet Errors and Their Impact
1. Data Entry Errors
Employees enter or update the expense spreadsheet manually. They capture the data from paper-based receipts and update the expense spreadsheet simultaneously. While updating expense spreadsheets, employees commit a variety of data entry errors.
For instance, they commit transcription errors by entering words instead of numbers. Also, employees commit transposition errors by changing the position of numbers. Data entry errors are often cited as the key shortcoming of expense spreadsheets.
Often the data entry errors committed by employees are detected at the time of expense approval or expense audit. Hence, data entry errors always extend the expense processing and reimbursement time.
2. Copy-and-Paste Errors
Employees find it easier to update expense spreadsheets by copying and pasting information from other digital files. They sometimes misalign the rows while pasting information onto the expense spreadsheet. The misalignment of rows escalates expense amounts and makes the entire spreadsheet erroneous.
For instance, the expense amount increases drastically when an employee enters the year as an expense amount. Employees often identify and fix copy-and-paste such expense spreadsheet errors on their own. But some employees escalate the company’s operational costs by ignoring copy-and-paste errors.
3. Typos
Increasing the number of zeroes in the expense amount is one of the most common expense spreadsheet mistakes. Employees often commit this typo while entering millions. Some employees escalate the figure by adding more zeroes, while others represent the figure erroneously by reducing the number of zeroes.
However, employees rarely incur business-related expenses amounting to one million or billion. There are still several instances when employees claim $ 100000 instead of $ 10000 for routine expenses like office supplies. The typos often delay the expense reimbursement process by making employees resubmit corrected expense reports.
4. Reformatting Errors
Spreadsheets allow employees to share only relevant information with others by hiding rows. While preparing expense reports using spreadsheet templates, employees often enter additional information and conceal the information by hiding rows.
The hidden rows containing numerical values escalate the expense reimbursements significantly. Similarly, employees can unhide the hidden rows to request reimbursement of expenses pertaining to the hidden expense category.
When employees convert expense spreadsheets into PDF files, the accountants or approvers fail to detect reformatting errors. Most organizations avoid this expense spreadsheet error by providing employees with customized spreadsheet templates.
5. Formula Errors
Popular spreadsheet software like Microsoft Excel enables users to simplify mathematical calculations by creating Formulas. As an expression, Formulas return values by operating the value of a range of cells.
Expense spreadsheet templates use Formulas to eliminate the need to perform calculations. But the accuracy of the value returned by the Formulas depends on the selection of cells.
If an employee alters the formula or selects the wrong cells, the total expense amount will go for a toss. Employees can leverage Formulas to speed up expense report generation only by choosing the right range of cells and ensuring the accuracy of every cell value.
6. Entry Overwriting Errors
According to Computer Hope, “In general, overwrite is a term used to describe when new information replaces old information or data.” Widely-used software applications like text editors or spreadsheets allow users to replace old information or data without any restrictions.
Hence, an employee can overwrite an entry multiple times while using an expense spreadsheet. But most spreadsheets do not support the option to track such changes or updates. Hence, entry-overwriting becomes one of the common expense spreadsheet errors.
The accounting principles do not support the rectification of errors through overwriting. Employees violate the basic accounting principles when they overwrite entries in the expense report without proper approvals.
7. Version Control Errors
Most organizations these days allow employees to bring and use their own digital devices. But they do not require employees to update their operating systems and software applications regularly. Hence, employees in an organization use different versions of the same spreadsheet on devices powered by different versions of the operating system.
The latest version of the spreadsheet comes with a slew of new features and does not support several features included in earlier versions. Version control errors occur when the company and employees do not use the same spreadsheet version. Version control errors make it difficult for the finance or accounting team to review and approve the expense reports submitted by employees.
Conclusion
The conventional way of tracking and processing business expenses is vulnerable to intentional and unintentional errors and mistakes. Some of the expense spreadsheet errors delay expense approval and reimbursements, while others create opportunities for expense fraud. That is why every organization can prevent revenue leaks and streamline expense management by keeping expense spreadsheets error-free.
There were many instances when large companies like Kodak and JP Morgan had to pay severance and lose goodwill due to spreadsheet errors. The steady growth of the global spend management software market suggests companies and startups replace expense spreadsheets with expense management software.
The expense management software generates expense reports automatically by capturing information from expense receipts scanned by employees. The automated expense report generation makes the software effective in eliminating common spreadsheet errors.
In addition to mitigating common expense spreadsheet errors, the expense management software accelerates expense reimbursements, prevents expense fraud, and ensures policy compliance. At the same time, the software makes it easier for businesses to conduct expense audits by capturing approvals and comments.
