10 Reasons Excel for Your Fund Management System Doesn’t Work

When first getting to know the fund management system needs of our private equity clients, we discuss what method they are currently using. Often, the answer is Microsoft Excel. 

Private equity firms tend to look for a new solution when they reach the limits of the functionality provided by Excel, which is inevitable. Excel is great for basic data management and analysis, but when it comes to the intricate work of managing relationships, funds, and associated deals, the systems’ shortcomings as a fund management system “stand-in” is glaring.

In our experience with many firms through the years, we’ve found that there are several reasons why Excel isn’t an effective tool for managing funds. If you’re currently using Excel or have used it in the past, you probably recognize some of these failings. 

What’s important at that point, of course, is taking action to address them. Firms that make the choice to “get by” with Excel or some other product or system not specifically designed for the private equity industry quickly find themselves falling behind their competitors. Then, they frequently have to try to research, vet, obtain and implement a fund management system even as they’re struggling to compete with other firms. 

It’s a stressful scenario that your firm can avoid by recognizing the signs and making your move to a new fund management system. 

Excel’s Limitations

Excel is a powerful, flexible tool, but it wasn’t created to help firms manage funds. That fact isn’t just apparent in a few key functions. There are actually 10 areas where the software falls short of the requirements for even the smallest of firms. And if your firm is growing or looking to grow, it can be even more restricting. 

Here is where we see the biggest drawbacks in using Excel instead of a purpose-built fund management system.

  1. Collaboration. 

When you’re working with individual files that must be shared, it’s challenging to collaborate. Using Excel, only one person can have the spreadsheet open at one time, which creates significant inefficiencies and an irritating user experience.

  1. Data integrity. 

All of us have had this experience: You attempt to open up an Excel file that’s been edited by several people and find that it’s corrupt. As a result, the firm loses the benefit of all the work that had been put into the spreadsheet. And even if you have a backup that can be recovered, you’ve still lost time and wasted effort.

  1. Storage. 

Controlling the location of an Excel file is nearly impossible. You might have a central location for file sharing, but it’s not uncommon to be working on a file and, for example, get called into a meeting or a phone call, so you save the file to our computer without updating the group version. This becomes a “hot mess” that has to be resolved, creating massive inefficiencies for the file users and the firm in general. In some cases, firms end up with hundreds of versions of the same document. (Yes, literally. Hundreds. We’ve seen it!)

  1. Control. 

Many Excel files used in fund management activities become a complex web of connected cells and formulas. Then, if a problem with the file arises, it’s nearly impossible to figure out what’s broken or how to remedy the situation. Even a well-intentioned, relatively knowledgeable user can blow up a file with one small mistake, rendering it unusable. And there is often no way to track who made which changes. Additionally, you’re probably going to end up with one person who is the “master” of that spreadsheet and understands it best. If that individual leaves the firm, their knowledge leaves with them.

  1. Connectivity. 

An Excel file can sometimes feel like an island in a sea of data. You likely have related information on your funds and the associated relationships, deals, and people involved, but it’s nearly impossible to marry all of that data together in a single spreadsheet. Consequently, your Excel file is essentially isolated. And as a result, you aren’t seeing the big picture and will have gaps in your understanding of funds.

  1. Stability. 

Working across interconnected workbooks often seems like being the person on the bomb squad wondering what’s going to happen when you snip a wire. The more connections you create between workbooks, the more precarious the situation becomes.  

  1. File access. 

In many cases there are constraints in Excel file access. You may have to be logged into a specific system, VPN (virtual private network), or document sharing network to access the proper file. Also, when you do get access, it’s typically from a desktop due to the inherent limitations in using Excel files from mobile devices. This isn’t ideal in today’s 24/7/365 private equity world.

  1. Reporting. 

If you want to perform advanced reporting in an Excel file, you’ll typically have to understand Visual Basic, and probably few people in your firm do. Plus, Excel doesn’t provide structured data points that you can report on. In addition, it’s hard to print from Excel, so putting together reports to take to your next meeting can be a tedious, time-consuming endeavor. 

  1. User experience. 

Pivot tables are hard to create, sharing files is difficult, accessibility is limited, and so on. We’re familiar with these issues, but they are increasingly hard to tolerate as we all become more acclimated to simplified, streamlined, web-based software experiences. And that irritation applies both to firms and the entities and individuals with whom they interact. 

  1. Human capital. 

Is it a good use of anyone’s time to function as the designated “Excel jockey”? No, of course it isn’t. And it’s important to recognize what a drain on your resources it is to continue to require someone to fill that role. It’s very important to free up your team to do more critical and strategic work.

Using Excel To Support Your Fund Management System

Excel is a great tool that has multiple uses, and we rely on it for many specific functions here at Altvia. 

However, if you’re using it in lieu of a fund management system rather than to support a fund management system, you’re probably encountering problems. 

Or worse, that approach is causing problems that you haven’t yet identified. You know… the shark that’s below the water rather than the one whose fin is making waves so you can keep an eye on it!

Whether you run a family office, fund of funds, or real estate office, you owe it to yourself and your stakeholders to learn how Altvia helps private equity firms move past Excel and operate more efficiently, securely, and effectively with a true fund management system. 

To see how firms are moving away from Excel and onto a platform built for Private Equity.

A traditional crm was built for general ‘customer’ scenarios

Software platforms have made the world a better place by making work a better place. Indeed the world is better off when people enjoy their jobs even marginally more, and workplace applications on big CRM platforms like Salesforce.com have done that and much more.

But the potential that platforms like these offer presents diminishing returns: once the platform provider has engineered too many industry specific components into its platform, its usefulness for other industries begins to be threatened, and with that so do the usefulness of the component tools built into the platform.

So it is with the CRM category that Salesforce.com has defined: it is generic enough to work for many industries, and yet still offers the potential for others to round off the edges and nail more vertically-oriented and extremely tailored software solutions.

Private capital markets are actually a great demonstration of this dynamic. Where generic CRM platforms simplify — appropriately so — to assume there’s a business, a customer, a sale, and service of that customer, there are a few industry-specific pieces that are missing.

Take for example, that investors become customers by investing through legal entities the GP raises. It’s a subtle but important nuance that just doesn’t make sense at a platform-as-a-service level (because it’s overly complicated for a simple one-time sale that many industries require), but which can easily be added without 10 years or software engineering. Once provided, the rest of the platform’s components become tremendously powerful again and you’re set to take over the world.

As a traditional CRM in our pillars methodology, these nuances must be present to properly account for investors in these legal entities, potential target companies and which are owned by these entities, the context of all interactions with these parties (as well as the appropriate overlap, ie co-investments), and how you’re arriving at finding these opportunities on both sides of the equation, such that you’re able to piece together what’s effective and what’s not. Not just because we say so, but because these are the very relationships and data that are key to the motivation behind a CRM in any industry.

It’s critical, too, that the valuable publicly-available information that helps to enrich CRM systems and save users painful steps of entering it themselves is fully-integrated at the platform level.

Again, look no further than the 3,000+ pre-built integrations that Salesforce.com — the creator of the CRM platform concept — has at a platform level to do so, and which only exists by way of holding just short of overly-specifying certain industry workflows that would present challenges to properly integrate.

Stakeholder reporting and communication (investor relations) draws on a range of datasets

The traditional “customer service” model of CRM systems once again makes overly-simplified assumptions about the customer relationship when applied to private capital markets.

In fifteen years I personally have yet to hear the terms “warranty” or “service call” in this market because it’s just not the same. But make no mistake, as uncomfortable as it may be to say aloud, customer service is more important now than ever and it’s constantly happening; the industry is, after all, considered to be a financial “service”.

As it turns out, that service is primarily information-based — it’s driven by data and takes the form of reports and analysis that drive decisions, and then end up again in investor-facing reports and analysis.

The foundational elements of a private capital markets CRM must be built such that they accommodate this data (like we discussed above), but so too that it can accommodate additional supporting data that investors (customers!) need in the context of service.

Oftentimes this supporting data — financial metrics and time-based values, for example — is believed not to meet the traditional definition of CRM and the natural thought is “well, better do this in Excel!”.

While I happen to believe Excel is still the greatest software application ever built, its introduction to this value chain we’ve discussed herein actually creates the problem many firms suffer from: key data needed to provide customer service (again: effectively the entirety of a firm’s reports and analysis) is now in disparate systems and detached.

Both of those dynamics are important and distinct: not only is this supplemental data disparate, but when brought together there is no logical association that can be made between the two data sets.

Allow me, then, to make the point very simply: not only can this financial and time-based value data (you may be thinking about is as “portfolio monitoring” or “accounting”) be a part of a CRM, it is arguably the most important part of a CRM because it’s at the core of what providing service to the customer entails — information that comes out of data!

Firms need a digital method to engage stakeholders (ie investor portals)

Investor portals are not new; in fact, for many of us — including myself — they conjure up horrifying nightmares in which we’re aimlessly guessing at folders to find the newest document we need.

So in lies the opportunity: not only have the portals we’ve come to hate not simplified the process of acquiring information, they’ve failed to create an entirely new experience that is “customer service” driven.

To be fair, this is not a B2C market where you’d be long out of business for not having focused on customer service and thus the customer’s technology-driven experience. But don’t expect to be around too much longer if you aren’t thinking about this shift.

Today’s institutional investors increasingly expect this same consumer-like experience, and a massive opportunity is being missed by not providing it. It’s not about providing them the experience they desire; it’s more about the ability to measure engagement that is had in return.

Put simply: what’s keeping the market from providing this experience is the availability of the information that’s required to create the service that provides the experience.

If you’ve hung in this long, you know that by focusing on your CRM, you have the data that’s required to manage the customer relationship and the technology-driven experience through which that information is shared to create a differentiated and opportunistic customer experience.