Dangers of Partnership Accounting within Excel: Are there Other Viable Options?

Scott Prince
June 1, 2010

As with most attempts at administering large amounts of data across multiple spreadsheets, the process of maintaining partnership accounting within Excel carries significant risks. Some of the more common errors that occur include broken links between files, errors in formulae that are copied and pasted, and the limits associated with providing consolidated reporting across numerous spreadsheets. Because the goal of partnership accounting is to provide capital account statements to the investors, the risks of maintaining the data within Excel are considerably high.

As an alternative to Excel, several software companies offer varying solutions for administering partnership accounting. Some of the leading applications include, SunGard’s Investran, SS&C’s The Next Round (TNR), Vitech’s Equitrak and Advent’s – Advent Partner. More recently, some of the newer players within the US market include TKS Solution’s Penny – IT Works and European software providers eFront and 3i Infotech – Framework. The benefits of utilizing a third party application include:

  • Consolidation of all data within a single relational database
  • Automation of the allocation of fund level amounts down to the limited and general partners
  • Built in reporting functionality

Given the presence of these applications, the question remains why so many firms still rely on Excel?

Part of the answer may lie in the level of customization that is often required. While these applications offer great flexibility in handling many of the nuisances of partnership accounting, invariably they all call for some type of customization in order to achieve full functionality. This is particularly true for the more intricate functions such as complex allocations and waterfall and incentive fee calculations.

An additional roadblock in Excel includes the challenges associated with the migration of countless spreadsheets – each configured slightly differently than the other – onto a single database location. The migration process often turns out to be the most time consuming and expensive component of the partnership allocation software implementation.

Despite the challenges associated with implementing these applications, the benefits of higher levels of confidence in the accuracy of partnership accounting data, combined with the efficiencies gained through automation, often outweigh the cost and effort involved.