From Spreadsheets to Software: The New Era of Funds Management And Lending

Traditionally, spreadsheets have been a popular tool used across the fund's management and lending industry. They offer a high degree of flexibility and a low cost, with many finance firms still using spreadsheets in some capacity today. Generally, spreadsheets are used to assist with daily fund administration, investment registry, or loan management workflows; especially in smaller businesses and startups.

From Agile Beginnings To Growing Concerns.

While spreadsheets offer great flexibility, there are risks and limitations; primarily around errors or omissions in data entry, calculations, or reporting, which can cause significant impacts. These risks become increasingly apparent as firms scale and grow in size based on metrics such as Funds Under Management (FUM), investors, and employee numbers, among other factors. This opens the door to potential operational and compliance risks, including the impact of hidden costs as a result of spreadsheet errors. Common risks and pain points with spreadsheets include:

• Manual Errors & Omissions - Data entry errors and formula errors are common mistakes and can result in significant amounts of time being spent to identify and fix discrepancies.
• Version Control - Difficulty in ensuring that teams are all working off the most up-to-date file or data.
• Poor Audit Trails - Lack of ability to easily track changes
• Security Concerns - Poor security features, especially given that many spreadsheets may hold confidential and sensitive information or data.

Did you Know? 💡

• There have been studies (including Panko, 2015) that indicate approximately 90% of spreadsheets contain errors, particularly those with 150 or more rows.
• In 2012, JP Morgan incurred massive losses estimated at US$6.2 billion. This was partially attributed to a spreadsheet error. The risk model used complex formulas where a sum was mistakenly used instead of an average when calculating risk exposures. (U.S. Senate. Permanent Subcommittee on Investigations. (2013). JPMorgan Chase Whale Trades: A Case History of Derivatives Risks and Abuses.)

Adapting to a Changing Landscape of Investors And Operational Needs.

Given the challenges outlined above, this presents an opportune time for funds management and lending businesses to assess upgrading in-house systems from a spreadsheet-based approach to a robust, modern, and long-term purpose-built software solution to manage funds administration, loan management, and investor requirements.

The need for more efficient solutions has increased in recent years—especially post-pandemic—with an increasingly rapid shift toward digital transformation of operations by implementing software-based solutions. This helps mitigate risks associated with spreadsheets and improves operational workflows and overall client experience. Common areas that appear to be driving these changes and this shift include:

• Changing Investor Demands - Increasing requirements for investor self-service, including investor portals for access to investment information; and digital onboarding mechanisms for investors to easily apply for investments.
• Remote Working Arrangements - Financial teams are increasingly working remotely in some capacity. A systemised software solution allows businesses to maintain better role management and user access controls for compliance and security.
• Efficient Data Processing & Reporting - Requirement to speed up the data processing associated with daily funds administration, registry, or loan management operations (such as distributions and bulk reporting functionality).
• Reducing Errors and Omissions - Requirements for more efficient approaches to operations, including mitigating errors and omissions with features like two-part processing, and user change logs or approvals.
• Increased Security Requirements - Requirement for more robust systems and architecture, with security features to safeguard sensitive information and data.

The Software Advantage And Key Features To Look For

Transitioning from spreadsheets to a fund management and lending software solution provides a systemised approach for fund managers and lenders, with many key benefits. These benefits include saving time, improving efficiency, and better managing compliance and security controls for insourced operational models. More specifically, common features that help improve daily operations include:

• Real-time dashboarding and investor or borrower reporting
• Bulk processing of standard functions like allotments, distributions, or interest runs
• Ability to integrate with other systems (often via APIs) such as accounting or CRM systems, to streamline workflows and operations.
• A single centralised database for information and data with scalable architecture and cloud-based deployment.
• Security controls around access controls, approval workflows, change logs, etc
• Features to support scalability such as introducing digital onboarding capabilities in place of manual paper-based application forms.

As the digital transformation continues to accelerate, those who hesitate to assess their operational systems risk being left behind with spreadsheet-based approaches, or legacy-based systems. This may lead to a possible loss of competitive edge against peers and lower levels of growth or efficiency.

Investing in the right purpose-built funds management or lending software solution will not only help businesses more easily manage operations, but will allow them to scale and grow, operate more efficiently and in a smarter way, and build trust and relationships between all parties involved.

To learn more about Titanium Digital and the in-house software solutions that we offer across funds management and lending, please get in touch or visit our website.

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Disclaimer: The information on Titanium Digital Insights is for general informational purposes only and does not constitute legal or regulatory advice. Titanium is a software company, and users should consult qualified professionals to ensure compliance with applicable regulations.