There was a time when spreadsheets ruled the world. It seemed as if there was nothing a sharp Excel spreadsheet and some targeted functions couldn't accomplish.

Those days are gone now. Excel may still be useful for a handful of simple tasks, but you should no longer treat it as a critical component of your business. In fact, spreadsheets may be destroying your activities piece by piece.

Five Reasons to Stop Using Spreadsheets

Regardless of what you employ spreadsheets for in your business, you're likely making a mistake. This is particularly true when it comes to inventory management.

Spreadsheets are incredibly counterproductive for inventory management efforts. You may not realize it now, but you'll definitely see the ill effects in the future.

As a forewarning, here are five of the greatest reasons why you need to stop using spreadsheets.

1. Don't Account for Change

Spreadsheets are static, which means they don't account for or respond to change. A spreadsheet may look great on the first day of a new fiscal quarter, but it swiftly becomes irrelevant the instant that new, actual numbers start to pour in.

Spreadsheets are wonderful in theory, but unfortunately we don't operate in a business world where theories define the situation 100 percent of the time.

2. Require Lots of Manual Input

"The ability to forecast inventory in real-time is crucial when it comes to meeting customers' demands," explains Jay Schofield of System ID. "However, when using spreadsheets, there's a good probability your system is out of sync with your actual inventory count because every piece of data relies on manual input. If you don't update constantly, your records won't accurately reflect what you actually have in storage."

In other words, one of the drawbacks of spreadsheets is that they command too much of your time for the benefits they deliver. Manual inputting of data doesn't seem like a big deal for a startup with just a few clients, but over time it becomes a major problem area, because eventually you may be dealing with dozens of large accounts.

And spreadsheets will always require a hands-on approach. There's no way around that.

3. Magnify Errors

Did you know that nearly 90 percent of spreadsheets contain an error? And if a spreadsheet contains more than 200 rows of data, the error-rate pushes all the way up to 100 percent.

At one point, Kodak discovered a spreadsheet error that brought restated income down by $11 million. Fannie Mae found an error that overstated earnings by $1.3 billion. Fidelity miscalculated dividends and sent out $4.32 per share distribution, when they in fact had undergone a $1.3 billion loss.

These are examples of serious and costly errors, but they illustrate that spreadsheets aren't necessarily as reliable as we tend to assume. If billion-dollar organizations with hundreds of financial experts can mess up this badly, isn't it possible that your much smaller company could, too?

4. Lack of Security

Spreadsheets aren't very secure. Most businesses don't even apply passwords to their spreadsheets. Even if a password is necessary, an interested party with basic hacking knowledge can easily crack it.

The capability for someone to duplicate the information on a spreadsheet and share it is surprisingly easy. That's a scary proposition when it comes to something as vital as your inventory management and financial records.

5. Very Expensive (Over Time)

Businesses generally use spreadsheets because they enjoy the reputation of being a cheap solution. After all, a spreadsheet software package may only cost a few hundred dollars for an entire office. Over time, however, spreadsheets turn out to be very expensive.

Think about it in terms of both real cost and opportunity costs. When a single error is made, it may require lots of time and money to correct the issue. Now, multiply this one error by hundreds or thousands and it becomes a big issue.

Recall the errors made by Kodak, Fannie Mae, and Fidelity, and you can see how serious these costs can be.

You Need Cloud-Based Inventory Management

But if spreadsheets are out, what's the alternative? Don't worry: you have a fantastic alternative waiting for you in the form of cloud-based inventory management. Here are a handful of the benefits you'll enjoy when you make the switch from cumbersome spreadsheets to the cloud.

  • Remote access. One of the biggest benefits of a cloud-based solution is that you can access it from anywhere. This means you can stay up to date on inventory regardless of where you happen to go. This added flexibility is an invaluable asset for busy entrepreneurs.
  • No more backups. With cloud-based inventory management, files aren't actually stored on a physical hard drive or server. This means you no longer have to worry about losing information or even backing it up. It's totally safe.
  • Scalability. As your business grows and inventory demands increase, a cloud-based solution will scale accordingly. This avoids the need to purchase new licenses, invest in more data storage, or worry about putting too much strain on your system.
  • Communication. Finally, cloud-based inventory management solutions work in conjunction with other cloud technologies. The cooperation between solutions makes it easy to share information and access resources.

In sum, cloud based inventory management solutions do everything that spreadsheets don't. They're safe, ubiquitous, and streamlined.

Throw Out the Spreadsheets

Consider this your warning: Spreadsheets stink. Though it's often hard to do away with technologies we've spent the length of our career using and perfecting, it's imperative that you begin to focus on the latest solutions that will allow you to grow in a safe and calculated manner. In terms of inventory management, a cloud-based solution is the answer.

Published on: Apr 21, 2016
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.