Sarb-Ox Spurs New Accounting Systems for Small Businesses

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August 3, 2004 -- Microsoft Excel might be nearing its 20th birthday, but a recent study shows that small and mid-sized companies have begun to look beyond the desktop-software staple as the foundation for their internal number crunching and accounting systems.

The study, conducted jointly by RevenueRecognition.com and International Data Corp., revealed that 80 percent of the respondents thought that spreadsheets should not be a foundation of critical accounting functions like revenue recognition, contract management and payroll. The survey, taken by 118 high-ranking finance officials, also found that most respondents are actively planning to migrate away from spreadsheet-based accounting systems in the next 12 months due to concerns about how those systems would stand up to new rigorous auditing requirements put forth by the government.

"This change, even among privately held companies, is largely being driven by government regulations such as Sarbanes-Oxley," said Gottfried Sehringer, executive editor of RevenueRecognition.com, in a release. "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."

As corporate accounting departments reeling from the backlash of the Enron and Tyco scandals work to comply with the tight reporting and financial controls dictated by Sarbanes-Oxley, the survey shows that even privately-held companies exempt from the regulations have begun to focus on tightening up their accounting systems by trashing their spreadsheets when it comes to accounting tasks critical to the company's bottom line.

Respondents pointed to the risks of relying on spreadsheets to run their financials: 63 percent of respondents said that spreadsheets are prone to errors, 58 percent said they lacked an audit trail and 56 percent cited the lack of internal controls. Only five percent of respondents said using spreadsheets carried no risk.

"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 at International Data Corp, in a release.