Benchmarking is essential to objectively assess how well products and systems in the market serve the core accounting and reporting needs of diverse businesses. This Benchmarking Project, part of the Good Spreadsheet Project, aims to identify and measure the true capabilities of various tools, from high-end ERP solutions to niche FP&A applications, amidst a landscape filled with marketing claims and white papers. It explores whether these offerings genuinely support business necessities for legal compliance, transaction recording, and essential management functions, or if they fall short.
Why Benchmarking Core Accounting Requirements is Essential.
A fundamental requirement for any business is the recording of transactions. In most cases, particularly for incorporated businesses with limited liability, this is a legal requirement. While the specifics of transaction recording methods aren’t typically defined by law, all business systems–from basic paper records for sole traders to complex, multinational ERP systems–must adhere to a set of foundational principles. For centuries, double-entry bookkeeping, formalized by Luca Pacioli in the 15th century, has been the cornerstone of accurate financial records. Every transaction impacts both sides of the ledger, providing a check-and-balance system that remains universal to this day. Any legitimate business system should therefore integrate, or at least interact effectively with, a double-entry system.
What Marketing Doesn’t Tell Us.
Despite this critical need, modern business solutions rarely address how they support these foundational accounting practices in their promotional materials. From ERP platforms to specialized FP&A tools, there’s often ambiguity around whether these tools offer transaction-level bookkeeping functionality or expect integration with a separate accounting system. ERP systems generally cover this requirement, but for other types of software, the role they play–whether standalone, complementary, or as an extension of an existing accounting system–remains unclear. This lack of transparency raises significant questions, especially when costly commitments are on the line.
Beyond Legal Requirements: Planning, Reporting, and Forecasting.
Recording transactions is just the start. Effective business management also depends on additional processes: budgeting, monthly reporting, and forecasting. These three interconnected activities support strategic decision-making by allowing businesses to set financial goals, track performance, and adjust for unexpected developments.
1. **Budgeting:** This is the financial roadmap set at the beginning of a fiscal year. It projects sales, costs, and resources, laying out the financial expectations that guide the business.
2. **Reporting:** Monthly or periodic reporting compares actual performance against the budget, giving management insights into real-time financial health.
3. **Forecasting:** As the year progresses, updating the budget with revised forecasts helps management adjust to new information–be it sales, market trends, or operational needs. This rolling forecast reduces surprises, aligning expectations with reality.
For any business solution to support robust decision-making, these functions should integrate smoothly. When they don’t, businesses resort to workaround solutions, often using Excel spreadsheets to bridge gaps between disconnected systems. This approach, though sometimes necessary, introduces inefficiencies, risks, and a loss of detailed insight.
Why the Benchmarking Project is Needed.
The Benchmarking Project addresses these gaps by creating a structured evaluation of tools and systems. It asks three core questions:
1. **Does the product meet fundamental business needs?** This initial level examines if the tool supports core requirements for budgeting, reporting, and forecasting. Products that cannot meet these standards can be quickly ruled out for specific needs, streamlining the decision-making process.
2. **How effectively does the product address detailed requirements?** This second level looks deeper, considering necessary features like drill-down capability, version control, user access permissions, and integration quality. It gauges the usability and practicality of the tool for real-world finance and accounting applications.
3. **What additional, nuanced needs can the product fulfill?** The third level invites input from the global accounting and finance community, creating a collaborative catalog of needs for complex and unique scenarios. This open-ended layer helps the benchmark evolve alongside the changing landscape of business technology.
A Real-World Evaluation.
To highlight why this benchmarking is crucial, consider a recent example involving a “cloud-based Excel alternative” showcased at a major industry summit. The product was marketed as an alternative to traditional spreadsheets, with claims of cloud compatibility and flexibility. However, when scrutinized on whether it could support a standard client-server model with cloud-based SQL, the technical limitations became clear. This was not an accounting tool as implied; rather, it was a web-authoring tool that generated web applications from Excel data. This illustrates a broader issue: tools are often marketed to an audience with accounting needs but lack the functionality to meet them.
A Framework for Transparency and Choice.
The Benchmarking Project is not just an evaluation tool; it’s a framework for transparency. By providing a standard against which products can be measured, it allows businesses to make informed decisions about their technology. And it doesn’t stop at identifying limitations; it also demonstrates solutions using the flexibility of Excel and its capabilities when correctly configured. By adhering to open-source principles, the project offers businesses access to a scalable, adaptable toolkit, free from proprietary constraints and opaque systems.
Building a Community-Driven Knowledge Base.
Level three of the Benchmark invites contributions from professionals worldwide. The complexities of business accounting vary widely, and there are countless niche needs that can only be identified by practitioners. By gathering these insights, the project builds a comprehensive, evolving resource that reflects real-world challenges and innovative solutions. The goal is to provide a resource where businesses can see clearly what each tool can–and cannot–do, along with practical recommendations for bridging gaps with Excel-based solutions.
The Good Spreadsheet Project: A Commitment to Practical Solutions.
The Benchmarking Project under the Good Spreadsheet Project umbrella is a commitment to effective, transparent, and flexible solutions. By evaluating products rigorously and sharing best practices openly, we aim to provide businesses with the insights needed to choose the right tools for their needs. This approach celebrates Excel’s adaptability and demonstrates how, with the right guidance and configuration, it can serve as a powerful solution in modern business environments, even in the face of increasingly complex challenges.
In a world where marketing often overshadows substance, the Benchmarking Project brings clarity, choice, and confidence back to the table, helping businesses find solutions that genuinely meet their needs.
This is a podcast by Hiran de Silva. Narrated by Bill.
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