Business-risk interest groups have found that spreadsheets are hotbeds for risk. Spreadsheets have an astronomically high statistical likelihood of containing an error when managing data such as revenue. Let’s talk about how you can quantify this risk specifically to your business.
In 2013, the University of Hawaii’s Ray Panko, as noted by MarketWatch, found that spreadsheets, even after thorough examination for error, contain 1% or more errors for all formula cells. The larger your spreadsheet and this risk compounds. The original article cited an average of 88% of spreadsheets will have an error that is overlooked. Even when one extensively educated, brilliant accountant or finance buff is put in charge and is meticulous in editing, errors are occurring. It’s not reasonable to expect an individual to catch the disastrous error(s) in what is often thousands of cells.
Spreadsheets are great for calculations, but not for routine data! If you are in the technology or Software as as Service industry, as directly cited from renowned BYU professors Jim Stice and Kay Stice, revenue recognition is routine data as it is necessary data! Especially if you are a start-up, revenue recognition highlights the value and potential of your product and company bring to the market. You don’t want any errors on your highlight reel! It will lead to either a devastating drop in your evaluation or an undervaluation. Both are detrimental to growth.
Take the time to calculate/forecast what it would mean for your growth and numbers for an error in revenue recognition that even your best and brightest brightest will statistically miss.
Spreadsheets are going to contain errors: 1% or more for all formula cells and for an average of 88% of spreadsheets. Have your earnings management team automate your revenue recognition with a revenue recognition software. Your highlight reel should speak to your potential, not your potential for error!
(MarketWatch Article: http://www.marketwatch.com/story/88-of-spreadsheets-have-errors-2013-04-17)
(Jim and Kay Stice on Revenue Recognition https://www.lynda.com/Accounting-tutorials/Running-Profitable-Business-Revenue-Recognition/383050-2.html)