The Risks of Excel for Private Equity Accounting

By: Kimberly Kale

Head of Product - Back Office
April 13, 2023

As Mike Trinkaus, CEO and co-founder of 4Pines Fund Services, told us, “The biggest challenge facing a GP today is data.” 

Private equity fund managers have collect data, store and manage it, analyze it, and report on it. And they have to do this for an ever increasing amount in a way that allows them to securely but quickly delivery it to a growing variety of stakeholders.  

“The biggest challenge facing a GP today is data.”

– Mike Trinkaus, CEO and Co-Founder, 4Pines Fund Services 

Despite these growing challenges, managers often turn to Excel to help handle their data needs. But Excel comes with significant risks that can jeopardize the accuracy, security, and efficiency of a number of GP workflows, but especially for the complex and essential tasks related to private equity accounting. 

In this article, we explain the risks that come with utilizing Excel for fund accounting purposes and what GPs can do to mitigate them. 


Excel’s limited functionality makes it challenging to collaborate with stakeholders

GPs increasingly have to share back-office data across a wide variety of internal and external stakeholders. For back-office teams that are solely or primarily reliant on Excel, this creates a challenge and opens the door to risk. 

Specifically, with Excel, teams will likely be unable to: 

  • Edit a shared workbook when offline 
  • View a workbook larger than 50 MB
  • Create macros with Visual Basic for Applications (VBA) code
  • Take advantage of advanced analysis tools and advanced formulas
  • Use several functions that become disabled once a sheet is shared (including creating/changing charts, deleting sheets, changing/deleting array formulas, and inserting/deleting blocks of cells) 

A frequently used workaround for these Excel for the web shortcomings is implementing version control with the desktop app (JanuryReport_v1.xls, JanuaryReport_v2.xls, etc.) and emailing back and forth between users. But, as anyone who has gone down this road knows, this quickly and inevitably leads to data management chaos. It becomes impossible to track who updated what, when, and where.


Disparate data storage means reporting deficiencies

Quality control and data integrity are also major issues inherent in any spreadsheet-based accounting and private equity reporting process, especially as the amount of data grows. The lack of a “single source of truth” across data sets inevitably results in errors that are difficult to identify and rectify. 

These challenges are readily apparent amid the abundant information requests limited partners have of their managers, requesting updates on potential cashflows, lines of credit, portfolio company statuses, and more. Institutions and individuals alike are looking for as much clarity as possible from their private capital managers, and providing it isn’t an easy task when data is stored in disparate spreadsheets or systems.

Email and spreadsheets heighten security risks

Private equity data security is another important consideration when looking at operational risks in the current environment. The more email is used to share information, the greater the odds of exposure to bad actors looking for vulnerabilities, and the private capital industry is certainly not immune. 

Sharing sensitive data – tax ID numbers, bank account information, and portfolio company financials – over unsecured “networks” such as email, exposes both GPs and LPs to immeasurable risks, should such information fall into the wrong hands. 

For GPs that use a fund administrator, there can be an enormous amount of information passed back and forth from GP to admin, generating both collaboration and security challenges. 

A potential workaround to the traditional GP/admin model is what’s called a co-sourcing model. Under this model, the GP owns or hosts the fund accounting and reporting technology (including the data), and the admin securely logs into the GP’s software system to support their assigned accounting responsibilities. 

Co-sourcing has two primary benefits: 

  • All the private equity data resides with the GP, reducing the amount of data that’s shared over email 
  • The GP continues to benefit from the expertise and additional resources an administrator provides 


Avoid the risks of Excel with purpose-built solutions 

As GPs data management challenges continue to grow, it will be vital to leverage software solutions that empower collaboration, streamline data workflows, and create secure, de-risked environments.  

Allvue helps fund managers grow their fund count while maintaining their head count. Allvue sets itself apart from the competition by: 

  • Providing purpose-built solutions, created specifically for the needs of private capital 
  • Leveraging a scalable cloud-based environment to allow clients to better collaborate and avoid costly upgrades 
  • Offering a best-in-class true general ledger so that teams can more easily handle the complex challenges of private equity fund accounting 

Moving to Allvue’s industry-leading platform provides innumerable benefits to fund managers who are struggling to keep pace while using spreadsheets to support their back office. 

As one Allvue client stated: “I couldn’t imagine how we could have worked through the current situation with the 8 to 10 spreadsheets we were using a few years ago.” 

Request a demo today to learn more about how Allvue helps empower superior investment decisions.

More About The Author

Kimberly Kale

Head of Product - Back Office

Kimberly is responsible for back office product management at Allvue. She joined Allvue’s predecessor, AltaReturn, in 2009 and has over 25 years of software management, including 18 years servicing the alternative investments industry. Prior to joining AltaReturn, Kimberly spent seven years with FIS/Investran, first in New York, and then transferring to London to manage the EMEA implementation team. She began her career at KPMG Public Services practice in Washington, DC, and moved on to implement ERP solutions for various insurance and healthcare clients. Kimberly holds a Bachelor’s degree from Vanderbilt University and is currently based in Allvue’s Miami headquarters.

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