Manual, inconsistent, invisible: Why spreadsheets fail the test of reliable accounting

Basic accounting principles exist for a reason. They are neither optional nor vague. They’re meant to give us a consistent, trustworthy foundation for financial reporting, especially when accuracy matters most.

But even now, spreadsheets continue to dominate processes for way too many finance teams. They’re used for accruals, revenue recognition, allocations, reconciliations and other critical functions. And all of this is happening in spreadsheets, outside the systems that are actually built to handle this data. We expect our reports to align with standards like Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS), yet we’re relying on manual tools that were never designed for this level of complexity.

We all want to uphold principles like reliability and consistency. But the truth is, spreadsheets quietly chip away at both. And they’re so familiar, it’s easy not to notice until something breaks.

Let’s explore the less obvious ways spreadsheets can undermine accounting integrity and what finance automation can do to help.

The silent killer of accounting integrity

At first glance, spreadsheets feel harmless. They’re fast, flexible and the tool most professionals first learned to use. But that same flexibility is exactly what makes them hard to control.

• No version control: Anyone can tweak a cell, save a new copy or email the wrong file. There could be six versions of the same schedule floating around.
• No audit trail: Adjustments happen, but unless someone manually annotates a journal entry or leaves a note — a step that is often skipped, there’s no method for tracing what changed.
• No guarantee of accuracy: Formulas break, references get outdated, links go bad. And if no one catches it, the numbers roll forward.

Now imagine that across dozens of schedules, teams and entities. You’ve essentially built a shadow system outside your ERP — a significant audit exposure. Worse, leadership ends up relying on those numbers. Decisions are made based on the financial information in those files.

One bad cell: Unknowingly compromising reliability

The principle of reliability says our numbers should be verifiable and backed by objective evidence. But in spreadsheet world, “evidence” is often a file path and a line item copied from somewhere else. That’s not a system of record; it’s just a folder on someone’s desktop.

You could have a perfectly valid entry, but if you can’t trace how you got there — or explain why it changed — it’s not really reliable. And in many cases, even the person who made the update would have to dig to remember what they did.

Automation changes that. It builds logic into the process. You’re pulling live values from your ERP, not referencing a hard-coded number from three weeks ago. Documentation lives in the system, not in someone’s email. If something changes, you know who changed it, when and why. That’s what makes information reliable. And that’s what auditors (and leadership) expect.

Consistency is a team sport

Consistency is one of those principles that sounds simple: treat the same financial transactions the same way, every time. Yet, in practice, it gets messy.

Every finance team I’ve worked with has some version of this: one person does it their way, another has their own spreadsheet and over time, the logic starts to drift. Revenue deferrals, expense accruals and intercompany recharges all start off aligned, then slowly diverge based on who’s doing the prep work. That’s not anyone’s fault; it’s just what happens when we rely on tools that don’t enforce consistency.

Automation fixes this by turning those “ways of working” into actual, repeatable processes. You define the logic once, and the system applies it every time across accounting periods, teams and regions. Everyone starts with the same playbook.

Adhering to the consistency principle doesn’t just make audits easier. It makes your reporting more useful. It gives your team confidence in the numbers. And it makes analysis possible because you’re comparing apples to apples.

Invisible knowledge: A liability

Then, there’s the hero problem. Every finance team has one: that person who knows how everything works — the macros, the tabs, the quirks. This individual is often indispensable, holding the entire manual process together. But when they go on vacation, leave the company or just get reassigned, that knowledge goes with them.

This represents a huge risk, even though it isn’t often discussed. If your month-end close depends on one person’s memory of how the spreadsheet works, that’s not a process but a dependency.

Automation helps you get that knowledge out of someone’s head and into a shared system. It turns invisible logic into visible steps. It builds documentation into the workflow. That way, new team members can ramp faster, and no one’s irreplaceable because the process doesn’t live in a file; it lives in the system.

This is how a scalable team is built.

A stronger foundation for modern finance

Accounting concepts haven’t changed much, but everything around them has. We’re moving faster, dealing with more data, experimenting with new accounting methods and being asked to add value beyond the basics, but we still have to get the basics right.

For many organizations, spreadsheets have effectively become the primary system for managing financial processes, operating as a kind of shadow ERP. Even with dedicated enterprise software in place, the most critical accounting work often falls back on a collection of manual, disconnected files. While valuable for quick analysis, spreadsheets cannot provide the integrity and control required to be the backbone of your financial position. The work traditionally performed in these files must be migrated to a centralized system built for scale and auditability.

Finance automation can reduce spreadsheet risk and help your team uphold the accounting principles that matter most — from the matching principle to GAAP compliance. Request a demo of Finance Automation by Redwood today.