Survey: Small and Medium Business Leaders Recognize the Need for Automating Accounting Processes

Business Wire, July 27, 2004

CANTON, Mass. -- RevenueRecognition.com Survey Finds Most Small, Private Businesses Reducing Use of Spreadsheets in Response to Government Regulations

Financial executives in small to mid market businesses (SMBs) understand the risks associated with manual accounting processes that are predominantly spreadsheet based. Many plan to dramatically reduce their reliance on spreadsheet-based accounting processes in order to increase the reliability of information and tighten up audit trails. Interestingly, even privately held organizations not bound by stringent government regulations, such as Sarbanes-Oxley consider this a major initiative in the next 12 months. That's according to a survey of 118 business leaders conducted by RevenueRecognition.com and International Data Corp.

Today, SMBs commonly rely on spreadsheets to perform key accounting processes such as revenue recognition, contract management, purchasing, inventory, billing and payroll. However, many businesses plan to move to more automated systems that offer tighter internal controls as well as greater transparency and insight into their companies' financial health. According the RevenueRecognition.com survey, 80 percent of respondents indicated that they believe spreadsheets should not be the foundation for these critical accounting processes.

"It is clear that spreadsheets play, and will continue to play, a role in the analysis and reporting of information, but are not the basis for auditable accounting information and related processes," said Kathleen Wilhide, research director, Corporate Compliance Applications and Business Performance Management Software, IDC. "This trend is even affecting smaller, private companies as they begin to implement stronger internal controls in the face of more stringent audits. The survey by RevenueRecognition.com and IDC shows that SMB organizations plan a dramatic shift from spreadsheet-based accounting activities to automated applications in the next 12 months."

According to the survey, companies are particularly concerned about several key tasks. Forty percent fewer expect to be using spreadsheets for closing the books. Companies also plan to reduce spreadsheet use by nearly one-third for tasks such as reporting, forecasting and handling deferred revenue. Similar drops are seen in the areas of revenue recognition, budgeting and planning, and billing schedules.

When asked what major risks are associated with spreadsheet-based processes, 63 percent pointed to the fact that they are prone to errors, 58 percent cited the lack of audit trail and 56 percent said they lacked internal controls. Only 5 percent claimed that no risks existed. "It is clear that finance organizations rely on spreadsheets as a key tool. However, market trends indicate that users are beginning to demand a foundation of information that is auditable and supported by applications that automate these key processes," said Wilhide.

"Spreadsheets can get lost or corrupted," said Al Flores, revenue manager at ArcSight a leading provider of enterprise security management software that reduced its reliance on spreadsheets with a revenue management solution. "Maintaining and reconciling the data from a spreadsheet back to the accounting system can be very time consuming. It may take the same amount of time to put the information directly into the accounting system, but what we get out the back end is a lot more analysis. Now we save a lot time because we don't have to maintain a very large spreadsheet--making sure links and calculations are correct."

The survey also revealed that companies find it substantially more difficult to establish internal controls in two key areas--36 percent indicated revenue recognition accounting was most difficult, and 29 percent said contract administration and management. Other areas such as purchasing and payables, inventory, fixed assets, order processing, billing and accounts receivable, payroll, treasury, and general ledger rated no higher than 8 percent.

"An important change is taking place in terms of how finance organizations are automated," said Gottfried Sehringer, executive editor of RevenueRecognition.com. "This change, even among privately held companies, is largely being driven by government regulations such as Sarbanes-Oxley. As they consider possible mergers and acquisitions, or even going public, these regulations come into play and executives want to be sure the books are in proper order. The best way to do that is with a financial infrastructure that eliminates the potential for erroneous, undocumented events especially where revenue is concerned."

The survey was conducted during May 2004. In all 118 high-ranking finance officials including CFOs, controllers and vice presidents of finance were surveyed. More survey results are available on line at www.revenuerecognition.com.

About RevenueRecognition.com

RevenueRecognition.com is educational resource for financial executives and dedicated to delivering essential information about revenue management issues with a focus on Revenue Recognition, SEC and FASB Guideline Compliance, Contract and Revenue Management. RevenueRecognition.com is hosted in partnership with CFO.com and Softrax Corporation, a leading provider of revenue management software solutions. To learn more about Softrax's solutions, customers and partners, please visit www.softrax.com.