CPM vs Accounting Software vs Excel. How Are They Different?

By Sam Cheo, Managing Director, Sigma Conso Asia
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Are CPM software, accounting software and spreadsheets alike? Or are they different? What’s the difference anyway? Can’t we just use any of them?

We want to help users uncover the difference between CPM software, accounting software and spreadsheets to understand how different these three are in nature. There is a significant difference among the three solutions in a few areas, notably productivity and quality.

1. Purpose

A key difference between the three methods is the purpose each tool is built for. Getting the right tool for the right job allows us to become much more efficient and effective in carrying out our job.

Why Can’t We Just Use Excel/Spreadsheets?

Spreadsheets have long been the common tool to facilitate the accounting and consolidation process of many companies. However, with the increasing amount of data that companies are producing and monitoring, spreadsheets are no longer ideal because of its relatively low computing ability. Moreover, spreadsheets are not optimized solutions to meet the needs of either the accounting or consolidation process. The workflow of spreadsheets is often raw and does not follow any best practices.

Instead of focusing on the accounting or consolidation process, man hours are spent on editing and improving the spreadsheets. This increases the lead time to produce an accounting or consolidation report and results in lower productivity for the accounting and consolidation process.

The risk related to updates of the spreadsheets highlights another problem with spreadsheets. With each modification to the spreadsheet, the risk of data/formula inconsistency increases. The latest version of the spreadsheet might no longer produce the same results as the initial version and it is often hard to determine whether there is any data inconsistency.

But We Have Accounting Software. Isn’t That Good Enough?

Because of the nature and design of an accounting software, it is optimized to meet the accounting needs of a single company. Thus, in terms of consolidating the accounts for a number of companies, it lacks in functionality as compared to CPM software. From a management standpoint, the number of man hours spent on doing consolidation could be greatly reduced with a dedicated CPM solution. The man hours that are saved can be allocated to value adding activities like creating reports or doing in-depth analysis. (for more details: read the dedicated Whitepaper: Consolidation using accounting software versus consolidation software)))

2. Quality

According to surveys done, auditors have expressed greater confidence in consolidation that has been done using CPM software as compared to accounting software or spreadsheets.

Consolidation On Accounting Software & Spreadsheets Are Manually Done

Most of the calculations, operations and transactions are manually done on a spreadsheet, albeit with some links and formulas. While accounting software do have some automation involved, the consolidation process is still manually done by “consolidating and grouping” companies with the same accounting tool into a fictional company and adding them up. These manual processes are hardly errorless and require a lot of checking and auditing on the auditors’ part.

Auditors: Seal Of Quality For CPM Software

Auditors have shown greater confidence in professional software that are tailor-made for the purpose of consolidation. In the eyes of auditors, CPM software represents a guarantee of quality because it makes all of the processes secured. In addition, the best-of-class CPM software also provides detailed audit trails. This enables auditors to access and audit each entry and its relevant information. This makes it much easier for auditors to complete their audit and ensure the quality of information processed.

Note: this article was originally published on LinkedIn.