The five risks of using spreadsheets for scenario planning and forecasting
Spreadsheets remain in use within most organisations and it’s easy to understand why. They are virtually cost free; a flexible ad-hoc reporting tool and most people have a basic understanding of how to use them. The temptation is high to “throw together” a quick spreadsheet to solve an immediate problem, rather than going through proper processes.
However, there is a distinct line between an ad-hoc reporting tool and a scalable performance management solution, which truly underpins a company’s decision making. There comes a point when spreadsheets can no longer support the business requirements.
Financial modelling by its nature requires flexibility in being able to extract, manipulate and visualise assorted data in a variety of ways. In order to make sure that everyone is on the same page so that errors of interpretation do not occur, leaders should embrace technology and data, reinvent core processes and adopt new collaboration tools. Leveraging technology to make faster, more informed business decisions, with remote working employees all collaborating from a single data source is an investment well made.
Five risks of using spreadsheets
1. Spreadsheet errors: it’s often a much-varied statistic but studies have estimated that 88% of all spreadsheets have errors in them, while 50% of spreadsheets used by large organisations have material defects.
2. It’s time consuming - error prone tasks to create a centralised single version of the truth that combines data management, planning, budgeting, forecasting, consolidation, reporting & analysis is very time consuming. Often the data is obsolete by the time it reaches your desk.
3. Two-dimensional analysis: Even in smaller organisations, financial and business data is simply too complex to be effectively stored, managed and utilised in two-dimensional, row-column relationships. Much time is wasted ensuring the once perfect template remains perfect across 500+ worksheets.
4. Version control issues with changing business conditions: With multiple spreadsheets flying back and forth through cyberspace, who can truly know if everyone is working on the same version.
5. Risk and security: Locked cells and password-protected sheets are inadequate and weak. Spreadsheets can easily go missing or be compromised.
7. No data aggregation or automated workflows: It’s almost impossible to streamline consolidation from multiple users and different spreadsheets to create a single version of the truth, a single logon, a single platform and an audit trail of who, when and why.
Spreadsheets, however tempting, are a hidden productivity killer. IT expenses appear to be lower when in reality, the cost to the business is much higher because processes are being performed poorly with spreadsheets. Eliminating manual processes, such as spreadsheet-based forecasting seems an obvious area to consider when looking for productivity gains.
For further information, including details on legacy software and how to mitigate their risks, download our full whitepaper.
In our final blog of this series, we’ll be exploring the real cost of legacy technology, so keep an eye on our social channels where we’ll be publishing details.