Excel? Really?

I find myself in marketing mode, and as usual, I keep going to the job boards, even though the likelihood of something from them is the same as winning the lottery.

I keep seeing the same requirement: Excel.

Really? I know of no accountant who cannot use Excel, including the newly minted auditors fresh from the university. My problem, of course, is how to address my use of Excel in the material I upload to various websites.

What I have found is that two skills, basic work paper technique and plain old consistency, are in short supply.

TECHNIQUE

Basic work paper technique is the same regardless of the medium, Excel spreadsheet or ledger paper. Each work paper should have a heading showing the name of the client, a description of the work, the as-of date of the work (that is, when the data were produced), the author, and the preparation date. Too often I find some or all of these items missing.

The work paper should set forth the work one is trying to document. Calculations should include a description of each entry—in the column heading, on the line, or usually both. The work paper should be organized so that the nature of the calculation is clear.

All of this is independent of the medium used to produce the document.

CONSISTENCY

I was hired to clean up an Excel file to project income and cash flow for a clothing company. There were two major issues. The first was why accounts payable changed over the period of the projection. The answer was simple. The model plugged in payables to make the balance sheet balance. I spent way too much time redesigning the model to ensure that it stayed in balance. I then could explain the change in payables, but now no one cared because the model kept income and cash flow in a consistent relationship.

The second issue, available credit, was never addressed. My client issued letters of credit to its suppliers all over the world. Under generally accepted accounting principles (and the model I designed), one recognizes this liability when the goods ship, perhaps months after the letter of credit was issued. The bank recognized this liability when the letters were issued. All during production of the season’s clothes, my client had difficulties arising from never considering—let alone knowing—how much credit he needed.

Projections of this complexity would not be possible but for the computer. However, I can think of other tools that do the job better than Excel. I use Excel in consideration for the accountants who will follow me. (You’re welcome.)

Excel is not the issue. It will do the job. Or I could, given adequate time, do this job by hand and turn out a nice set of work papers. But no matter how the calculations are done, the model must be designed right and the assumptions correct.

And so Mr. Client, yes, I know how to use Excel.

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