Quick, flexible, and easy to use. It’s no wonder Excel is one of the most widely used tools around. Microsoft Excel turned 30 this year, and without a doubt, the application has claimed an unparalleled share of the corporate mind set.
The extent to which day to day activities are dominated by it – particularly within the Finance function – has empowered staff to ‘get the job done’, notably where other tools may have failed. The ability for all levels of staff to process data and present information with ease; whilst at the same time allowing them to solve problems and business challenges in the way users want to, all contribute as to why spreadsheets are here to stay.
But spreadsheets are also like icebergs, with hidden pitfalls. It’s not what you see, but what you don’t that puts you at risk. What seems at first glance as awe inspiring can result in inherited errors you didn’t even know were there. Like wise old seafarers, it’s sometimes sensible to change course if you want to avoid what’s hidden below the waterline. A recent poll by YouGov* found that
“17% of large businesses have suffered financial loss due to poor spreadsheets*”
In other words, spreadsheets can be harmful to your bottom line
As Excel enters its 4th decade, it seems we simply can’t live without it. If, as research suggests, we are that dependent on it, how can you be better equipped to reduce, or even avoid financial loss?
A recent independent survey** confirmed over 79% of CFOs and FDs are concerned over the reliance of using spreadsheets for their most important finance function processes.
This is not surprising, when it is widely accepted that most spreadsheets are redesigned at some point. The flexibility that the humble spreadsheet brings, means the variety of ways in which users might approach a common task results in lack of consistency and control. What can start out as a tactical solution to an immediate problem can quickly end up with a set of workbooks that are difficult to manage and maintain. These are examples of why many errors are found within different parts of a spreadsheet. Without clear governance features like version control and traceability, spreadsheets represent an unwanted risk to your organisation.
“The West Coast Main Line bid from Franchisee First Group collapsed, due in large part to “technical flaws” in error-prone spreadsheet models – resulting in a cost to the UK Tax Payer of £55million***”
The larger the company, the more spreadsheets, and the greater the exposure to potential error and loss. Too many spreadsheets was cited as the most challenging issue by 56% of CFOs and FDs in a recent independent survey**. The high incidence of errors within large spreadsheets leads us to question whether it has outgrown its value amongst the complex challenges in larger Finance functions. The survey suggests that businesses are looking to address this vulnerability and are starting to consider Finance friendly alternatives which address these risks and still respect the need for flexibility.
New technology solutions are available that offer greater consistency, eliminate version control issues, provide built-in back up, and compliance support, whilst incorporating the use of Excel. Businesses are starting to review use of spreadsheets in finance departments – after all, spreadsheets are at their best when used either as a tactical tool, or as a prototype for a more formal process design. To support this activity businesses are looking at their processes and how new technology can provide alternatives to large numbers of complex spreadsheets. They are looking to realise benefits such as reduction of errors, elimination of wasted time, and cost savings.
“The use of Excel can be balanced by reducing risk to businesses, avoiding the Fidelity Magellan scenario. A forgotten negative sign in their annual accounts caused a $1.3 billion loss to be miscalculated as a gain, causing an irate reaction from shareholders and chaos in the market***”
As spreadsheets are here to stay, the time is right to critically evaluate their best use. Just as an iceberg remains largely unseen beneath the surface, so are the hidden risks of poor spreadsheets.
Accountagility has developed a suite of solutions for the Finance function, which directly address the risks and dependencies of spreadsheets in areas such as Planning, Period End Closing and Expenses.