Any finance professional will tell you that they have a special place in their heart for Excel, for better or for worse. It became and remains the backbone of financial planning, reporting, and budgeting processes globally because it is a powerful and familiar application. The challenge is that powerful and familiar do not always equal better and reliable, which becomes more apparent as processes and datasets become larger and more complex.
Therefore, in this increasingly volatile business world, it has become essential to assess your company’s reliance on Excel.
Excel, whilst one of the best productivity tools ever and the go-to tool for finance professionals, when combined with an ERP is seriously limited. Although a necessity to the business, the combination is rigid and lacks the flexibility to introduce operational activities with financial data to drive real performance, especially when complexity, scale, and volume are added.
In turn, line of business functions become siloed and so much valuable data gets locked away, missed, or lost in spreadsheets, eventually eroding profit. As discussed in my previous article, establishing an Integrated Business Planning framework can be a powerful way to eliminate these challenges. This is not possible to do in spreadsheets, you need an Integrated Business Planning tool, so you can introduce operational and financial data, help the organization collaborate across the business functions, and enable them to plan and develop business scenarios.
Only a single platform, not hundreds (thousands) of spreadsheets will eliminate siloed processes and drive effective and accurate financial outcomes at scale.
A spreadsheet is good for quickly modelling a problem but too often, organizations cut corners and press the cardboard-and-string mock-up into production, instead of building a robust and unique system based on the Excel proof of concept.
These processes then become a part of your organization’s “Shadow IT”, which refers to the hundreds of end-user spreadsheets and other hidden data assets, created by employees using applications that are outside the governed protocol.
I love this quote from Tim Harford, at the Financial Times:
“It’s like using your Swiss army knife to fix your kitchen because it’s the tool you have closest at hand. Not impossible but hardly advisable”. (Financial Times, 2021)
Just like Excel, a Swiss army knife is an amazing and useful tool, but when a process becomes too complex and large, they are limited and there are better tools available to get the job done.
I don’t think I have spoken to a finance professional that can confidently say that their planning, reporting, and forecasting processes in Excel are error-free.
Back to assessing your reliance on Excel. Answering these questions can identify risks in your spreadsheet processes.
1. Can you locate all the spreadsheets and end-user assets across your organization for your planning, reporting, and forecasting processes?
2. Can you identify the relationships between them and their data lineage?
3. Do you have transparency into who owns each file, and which areas of the business use them? For example, can people access sensitive information that shouldn’t be able to?
4. Can you quantify and assess the risks associated with them? For example, do you know what spreadsheets have errors in them, and do you know the value these errors could cost you?
Finally, if you’re still not convinced of the danger Excel poses, a real use case that is close to my heart being from Alberta, is the infamous $24 million copy-and-paste mistake at TransAlta. A cut-and-paste error in an Excel spreadsheet got overlooked and caused the Canadian utility company to buy more US power transmission contracts than they should have, causing them to lose $24 million in 2003.
Further detail on this and other examples of costly spreadsheet errors can be found in “Eight of the Worst Spreadsheet Blunders”.
If you are interested in learning more, we cover steps to eliminate and avoid expensive spreadsheet mistakes in more detail in The Profitability Architects Playbook, our guide to driving higher performance.
If you’d like a copy please get in touch.
Written By Lance Tylor
Lance is a business finance professional with a passion for helping businesses grow. He is a Charted Management Accountant (CMA) within Canada and in the UK and has had several roles within the Office of Finance. His experience has always been focused on business strategy, performance management and business process improvement (leveraging the latest technologies).
Sources:
Harford, T. (2021, June 24). The tyranny of spreadsheets. Retrieved February 2023, from Financial Times: https://www.ft.com/content/18db20d8-7726-43e2-87f1-c5861ad3dff5
Wailgum, T. (2007, August 17). Eight of the Worst Spreadsheet Blunders. Retrieved February 2023, from CIO: https://www.cio.com/article/274673/enterprise-software-eight-of-the-worst-spreadsheet-blunders.html