What tools are you using in your receivables management strategy? If your organization is using spreadsheet for receivables management, we can assume with some level of certainty two things about your collectors; (1) they’re not being efficient and (2) they are likely working on inaccurate information. We can assume these things because as with any manual process, your spreadsheets are time consuming and susceptible to human error such as keying in the wrong numbers or copying over the wrong formula. In fact, a study by Dartmouth College’s Tuck School of Business, found that 94% of spreadsheets contain errors! Below are a few stories of small spreadsheet errors that led to BIG problems that just might make you want to pitch spreadsheets once and for all.
Infamous and Costly Spreadsheet Mistakes:
- TransAlta, a Canadian power generator, lost $24 million due to a a cut-and-paste error in an Excel spreadsheet that we did not detect when we did our final sorting and ranking bids prior to submission,” according to chief executive Steve Snyder. The mistake caused them to purchase more US power transmission hedging contracts in May at higher prices than they should have.
- Fannie Mae discovered a $1.136 billion error in total shareholder equity which the Senior VP explained was due to the fact that “There were honest mistakes made in a spreadsheet used in the implementation of a new accounting standard”
- The University of Toledo fell victim to an internal budgeting error (caused by a typo in a spreadsheet formula) which led officials to overestimate the projected revenue by $2.4 million!
- RedEnvolope Inc. also experienced major problems due to a number being mis-recorded in one cell of a spreadsheet. The mistake threw off their entire cost forecast, resulting in shares of company losing over a quarter of their value after warning of a fourth-quarter loss due to weak Valentine’s Day sales and a budgeting error that resulted in an overestimation of gross margins.
- Westpac had to stop trading on its shares and deliver its annual profit briefing a day early because an employee mistakenly sent its results to research analysts in an email. Details were embedded in a template of the previous years’ results and were accessible with minor manipulation of the spreadsheet. (News reports indicated an employee had thought that a black cell background fill would hide black text.)
While none of these blunders are directly related to receivables management, you can see how a small typo or extra zero can cause a lot of trouble down the line, especially in an area like accounting where everything ties together.
How to avoid spreadsheet errors in receivables management:
- Put in place a policy for spreadsheet development.
- Require employees to double check each other’s work before a spreadsheet is used in an analysis.
- Double check all formulas used in the spreadsheet to ensure accuracy.
- Replace spreadsheets with receivables management software.
Working with spreadsheets and entering data in multiple locations can be time consuming as it is and having to check and double check work can slow productivity and may cause collections to slow even further. To be most effective and efficient, Your collectors need to be able to get all of the information in one place and tools to quickly and effectively complete their daily tasks. By ditching the spreadsheets and using an automated receivables management system, collectors can stop wasting time digging through piles of paper to find their outstanding accounts or to filter out the largest invoices, and spend more time calling those accounts, managing disputes, and helping get invoices paid faster.