Using Spreadsheets for Managing Inventory

Spreadsheets are typically the main information management system used in the early stages of any business.

Finance usually moves to a dedicated system first, with QuickBooks selected as a low cost, proven and accepted way of managing an SME’s ledgers. But spreadsheets remain in place in other departments.

Why is this?

I think spreadsheets continue to be used for two main reasons:

1. Spreadsheets are easy to use for manipulating data and amazing at analyzing data. They give us local control of our data in our business area.

2. If you are a company that buys, sells or makes stuff, you have discovered that QuickBooks is not great at managing inventory!

To be fair to QuickBooks, it was never intended to be a full-blown business management system. The company’s goal was for QuickBooks to become the world’s leading financial management system—and that is what it has achieved.

In my experience, successful businesses usually have a truly clear view of who they are and what they are. They don’t get easily distracted. So QuickBooks should be applauded for what it has achieved, not pilloried for failing to build a full-blown inventory management system as well.

Spreadsheet limitations in inventory and department management

Let’s dig a bit more into the impact of using spreadsheets to manage inventory and run other departments.

One reason that spreadsheets are so widely loved is they give you control over the data in your department. You can enter the data, manage it and analyze it. It is YOUR system, and you have ownership. That is a very powerful motivator, and we shouldn’t forget that.

But as the business grows, the very ownership and independence of the spreadsheet starts to work against the business. Before too long, you have an inventory quantity in Purchasing that is different from the inventory quantity listed in Sales. It becomes difficult to sync all the spreadsheets manually.

Then you have a problem. No longer do you have “one version of truth”—and this impacts your decision making.

At that point, you need to consider implementing a single, integrated business system to manage your company data.

You need a system that addresses all the departments of your company. You need an enterprise resource planning (ERP) system. But be sure you select one that has been specifically designed to be used by SMEs, or it will give you indigestion!

SOS Inventory is an ERP system that is used exclusively by SMEs globally—and designed specifically to work seamlessly with QuickBooks Online. SOS is easy to buy (free trial on the website), easy-to-implement (up and running in 3-6 weeks means no massive disruption), and affordable ($49.95 per month for a starter system for two users).

An ERP system will allow you to create a unified business in which the departments are all pulling in the same direction and all working with one set of data.

Spreadsheets will always have their place as complementary analysis tools. They easily extract data from the ERP system and analyze that data locally. But an ERP allows a unified business to work from “one version of the truth,” enabling growth and investment.

Andy Makeham has enjoyed a lifetime in software ‘business development’, as a programmer, implementor and entrepreneur. He has grown, bought and sold many business software companies and floated one on the public markets. He has worked with private and ‘private equity’ owners. Today Andy acts as a business development advisor to the software sector. In that capacity he is working with SOS Inventory.