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Data Management

5 Hidden Costs of Using Spreadsheets for Loan Management

Jan 2, 2023

2 min

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Spreadsheets are the comfort food of financial management tools: familiar, readily available, and simple. However, beneath the surface of familiarity lies hidden costs and limitations for non-bank lenders who rely too heavily on Excel spreadsheets instead of loan management software.

1. Manual data entry contributes to more errors

Spreadsheets, though powerful, are not immune to human error. Sophisticated formulas can quickly become complicated, especially when multiple contributors are involved. From data inaccuracies that lead to erroneous calculations, to rogue zeros, commas, and decimals, manual data entry required for a spreadsheet-based process jeopardizes the reliability of the loan management process.

Creating and managing complex processes like amortization schedules within spreadsheets often proves to be another Achilles' heel. Changes to loan terms or unforeseen events often result in painstaking adjustments and an increased risk of miscalculations. The lack of automation hinders the ability to adapt swiftly to market changes and respond effectively to borrower needs.

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2. Data analysis and visualization complexity

Non-bank lenders often realize the limitation of spreadsheets in handling large amounts of data, especially as their loan portfolios expand. The manual effort required to consolidate, analyze, and visualize data in Excel can become increasingly burdensome. What seems like a straightforward solution turns into a time-consuming task, diverting attention from critical aspects of the business.

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3. Lack of role-based security increases risk

When dealing with sensitive client data, the last thing you want is to risk access to customer data. While spreadsheets can be password protected, they don’t allow for more sophisticated user roles and permissions. That means all data is accessible to everyone with the password, regardless of what they actually need to access—putting sensitive customer data at risk.

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4. Misallocation of human capital

Spreadsheets may be a cost-efficient tool, but they don’t let you allocate your most important resource effectively: your people. Human capital is an organization’s most valuable and impactful resource. Would you rather your employees spend time getting bogged down in the time-consuming maze of spreadsheet management, or cultivating client relationships, assessing risks, and exploring new deals? Sticking with spreadsheets may reduce your technology expenses, but that shouldn’t be mistaken for overall business efficiency.

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5. Transitioning Struggles: The Hidden Costs of Delay

What happens when your business recognizes the limitations of spreadsheets, and finally decides to move to a SaaS-based loan management software? While spreadsheets provide a comfortable starting point, delaying the transition to more advanced solutions can incur significant hidden costs. From reconciling data during system implementation to retraining staff, and overcoming internal resistance to change, the costs of delayed automation extended beyond finances, impacting operational efficiency and customer satisfaction.

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While spreadsheets offer familiarity, they come with hidden costs that can impede the growth and efficiency of your loan management operations. When organizations realize they’ve outgrown their spreadsheet-based processes, it’s often already too late. Making the switch to loan management software early on can help scale your team’s time, protect sensitive customer data, and set you up for sustainable growth and success.

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