5 Reasons Why Excel Doesn’t Add Up for Stock Plan Management

By Don Gillotti. I have spoken to thousands of public companies over the last 15 years in the equity compensation business and I have heard a lot. The thing that still surprises me more than anything is the number of companies using Excel for stock plan administration and/or accounting. Sometimes companies are unable to justify the expense of using the latest technology or are just not aware of the solutions that are out there, but either way it is time to start looking. There are five main reasons why companies should look to move to a solution designed specifically for equity compensation management.

  1. Controls. You would be hard pressed to find an accountant that would argue there are better controls in Excel for financial statements over solutions designed specifically for compliance with ASC718. Excel lacks the security of an equity compensation management solution, and there is too much chance for error with all the macros and pivot tables required to perform this kind of technical accounting on spreadsheets. It is difficult and time consuming to find the source of an error, and if you change one value there can be loads of unintended consequences.
  2. Scalability and succession. You probably don’t want to be handling this somewhat esoteric area of accounting forever, which means someone is going to follow behind you and take over the miles of spreadsheets you have created. In order to standardize the process, it’s in the best interests of the company and those who will follow you, to migrate to a standard system designed specifically for handling share based payments.
  3. Tax Deductions. We’re getting closer to the point where a spreadsheet just won’t be acceptable for the IRS when it comes to taking a deduction for share based compensation on the corporate tax return. Being able to show every grant, every exercise, and every release for each period, along with the ability to tie the entries back to that source data is hard to do with spreadsheets – nevermind trying to build or recreate an APIC pool.
  4. Statements. Most stock plans require the administrator to send a statement at least once a year to participants. It isn’t trivial to produce and deliver a consolidated statement to a number of participants when the data is in a series of spreadsheets. The challenge of turning raw data into digestible participant communications is difficult enough that it’s likely keeping some companies from sending out these required statements, and therefore falling out of compliance with their own plans.
  5. Audit ease. Sounds like an oxymoron, but it’s possible! The many different ways to express stock plan data in Excel challenges your auditors to a longer learning curve, compared to reviewing output from a well-known system. When performing a stock plan audit on a trusted equity management solution, auditors can rely on the standardized platform and likely have familiarity with each solution on the market – streamlining the audit process.

Moving from spreadsheets to a more automated solution may seem like a costly and time-consuming task, but in actuality your company will likely experience a great savings in time and resources as a result. Our independent ROI study will help you identify specific sources of return on investment of the purchase of a comprehensive, SaaS-based financial reporting solution. Consider the improved controls, scalability, improvement in participant communication, and tax and audit simplification. Learn more about your options here.

Don Gillotti