Capital Markets Insights

6 Reasons Your Private Equity Investment Firm Needs to Kick Its Excel Addiction

How much of your private equity firm relies on Excel, Google Sheets, or similar spreadsheet software?

If you’re like most businesses, the answer is “too much.”

Many of factors that make generic spreadsheet software so widely adopted by businesses are the same things that make them so dangerously ineffective. That’s right - there’s a real danger to using generic spreadsheet software instead of a tailor-made solution.

Here are six ways spreadsheets can harm your business.

Error Prone

There is only rudimentary error validation systems on spreadsheets, making it all too easy for a mistake to slip by unnoticed. And, as any business knows, errors can be deadly. With investment management firms and their necessary attention to detail, those issues are compounded.

A simple mistake in an Excel column can be costly, and extremely so for a private equity company. There’s simply no reason put your business at risk like that.

Time Intensive

Excel and other spreadsheets are not a real working environment. They lack structure, and don’t have the level of automations or capabilities of industry-specific software, especially when it comes to private equity software.

Excel formulas skew towards the arcane and esoteric, especially when they’re being used to compensate for software that’s not specialized for a specific industry. Setting up the right formulas is a time-and-labor-intensive practice, and it’s also hard to explain to the back office staff how to use the document correctly. And, as we already mentioned, all it takes is one mistake to cost your business dearly.

Won’t Scale With Assets Under Management (AUM)

Sometimes you need to bring in more advanced pivot tables than Excel can deal with. Since the program isn’t designed to scale with your AUM, it will become more and more tedious and ineffective to use spreadsheets as your portfolio grows.

With Excel and other spreadsheet software, the more data you put into them, the harder it becomes to find what you need, when you need it. As your AUM portfolio grows, your spreadsheet will become even more unwieldy and difficult to use. This leads to sunk time and opportunity lost.

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Won’t Keep up With Growing Demands

If your system needs to grow, you end up growing a mess that someone has to learn. Imagine bringing in a new employee and trying to get them up to speed on the massive, homegrown spreadsheet solution you’ve been using. If they don’t immediately pass out from shock or get up and walk out, you’re looking at a long and complicated onboarding process.

When you’re scaling up your private equity firm, the last thing you want to do is become more inefficient! If you’re relying on Excel or other generic spreadsheet software to get you there, you’re simply setting yourself up for disaster.

Not a System of Record

One of the worst things about standard spreadsheets is that they can’t be audited, and you can’t find out who made changes to the data. This simply compounds the other problems inherent with working in generic spreadsheets, as it becomes next to impossible to track down the sources of errors and mistakes.

Copying the File Around / Multiple People Working on the Document

As if the other problems aren’t enough, Excel adds to the headache by making it difficult for multiple users to access. If you’re passing around an Excel file, there’s a built-in danger that someone else has the most up-to-date version, and you’re working on an old file. Plus, what do you do when that person is out of the office or unavailable?

Google Docs and its shared ecosystem makes things a little easier for multiple users, but it doesn’t offer a true solution like you’d find from purpose-built software. It also adds the security complications that come from using cloud-based software that isn’t designed to protect sensitive financial information… but at this point, what’s one more security concern? If you’re still using Excel for your private equity investment platform, you need to up your game.

Explore the Alternative to Spreadsheets