Microsoft Excel is the world’s most widely used analytic tool, with estimates as high as 750 million users worldwide. When used for financial data, Excel works well as a personal productivity tool, allowing a single user to manipulate clean data and examine specific tactical questions such as “What were my revenues for our Western Region last year?” Excel quickly becomes problematic, however, as you add more users, data sources, formulas, and questions—all of which are critical to understanding and optimizing financial performance.
Nothing throws financial reporting off its axis quite like the chaos of managing multiple regions or currencies, conflicting financial close schedules, and a wide range of products and services. With so many moving pieces influencing your financial performance, spreadsheets quickly fall short. If you are still using a spreadsheet application to generate financial reporting, it’s time to stop. Spreadsheets are not only extremely time-consuming to maintain but also rife with potential errors. And when your margin tracking, cash flow, profitability, and statutory reporting rely on reports generated by those spreadsheets, you can’t afford the risk.
Especially among employees who don’t often use spreadsheets, opening an Excel file can be intimidating. Whereas a financial analyst might find spreadsheets useful, people in other roles may find them off-putting or downright confusing. That means you’ve already alienated a portion of your data-hungry audience from the outset. Many people won’t even bother opening a spreadsheet sent over email, let alone get excited about analyzing them to uncover insights.
Because a spreadsheet present all the raw data at once, it’s difficult to interpret what’s important and what’s not. Visualization tools can be used to highlight the important aspects of a data set or results, but in spreadsheets it’s hard to see the forest for the trees. When raw financial data is presented in rows and columns, it is not easy to determine outliers, exceptions, or areas of focus. Your spreadsheet supporters are missing the point if the rest of the team finds it difficult to identify core financial elements, trends, or relevance to their day job. And when it comes to viewing spreadsheets on a mobile device: open up a financial spreadsheet on your phone right now and try to find a specific cell. Enough said.
How much time, effort, and skill does it take you to generate a proper financial spreadsheet? If it feels “too expensive” in the time it takes to gather the information you need, the effort to rationalize the various data inputs, and the skill required from your top people to massage and interpret the data daily, then it probably is too expensive. Also, any financial spreadsheet that has an intimidating or impressive name (“Skynet,” “Sauron,” and “Godzilla” are popular) or one that requires specific skills or a dedicated person to deliver is probably too expensive for the benefits derived. And that assumes you and your team have correctly mixed financial data from all your regions and groups, maintained calculation logic, and created consumable, actionable financial reports without errors.
Your financial spreadsheet is only going to provide data as timely as the last time it was updated. Because of the time, effort, computing, and skills required to make these updates, teams are not likely to do this frequently enough in order to effectively act in volatile markets.
Most organizations using spreadsheets are looking at financial data from last month’s “soft close” at best, or more likely at a moment in time several weeks or quarters behind. This limits your time and ability to course correct issues and monetize opportunities.
If you are able to quickly compare financial data for a particular region, group, or practice or product across months, quarters, or years automatically within your spreadsheet, you are in the rare minority. Most financial spreadsheets are snapshots of a moment in time (last quarter, June, etc.) because of the expense of storage and data collection constraints of Excel. For the rest of you, just looking at a single number such as “$73M” without context or history hampers your ability to actively and effectively improve your financial performance.
Because it’s so challenging to view historical data in a spreadsheet, your ability to drill down into the key transactional data driving financial performance is limited. Are revenues down because your three largest projects are behind schedule and you can’t recognize the revenue? Is it because of currency fluctuation? Are your sales reps all selling a product in which you lack the stock to deliver in a timely fashion? Or are they just not including add-on products or services with your core offerings? Without transactional data, these questions either remain unanswered or, worse, fuel new spreadsheets, finger-pointing, and arguments over who has the right data.
Even with cloud solutions like Google Sheets, it’s difficult to collaborate on a spreadsheet among multiple team members. Because of the possibility that data could accidentally be deleted or changed, many important spreadsheets are still shared as static documents.
At best, a financial spreadsheet might get emailed once a week, which makes it easy to get lost in inboxes. As for collaboration, filling your revenue forecast spreadsheet with everyone’s individual comments, or using the “just read my email to see what I’m asking” method is rarely efficient either.
Too often the answer to the collaboration issue cited previously is to lock your financial spreadsheets, so you can share them without worry of alterations or edits. Unfortunately, most people figure out a workaround, saving a local copy that they can edit themselves. Now instead of being more secure, you are less secure, and everyone has their own copy to alter or take with them if they leave the company. This can also lead to issues around auditability (“Who knew what when?”) and wasted resources as multiple organizations try to determine who has the final version of the budget spreadsheet.
Most people think of their financial spreadsheets as “just a report”, but the reality is that it is much more than that. Because most financial spreadsheets combine transactional financial data, aggregated numbers, calculation logic, and a presentation layer, your spreadsheet is more like a development environment than a simple report. However, most users will use it as a simple report and look only at the data they need at that very moment. This sacrifices traditional development rigor such as proper data modelling, testing of formula logic, documentation, versioning, user types and training, device form factors, auditability, and many of the other elements mentioned earlier, such as collaboration and security. What happens when the original creator of the VBA code in your financial spreadsheet leaves, or the multiple version problem becomes so widespread that no two regions, groups, or practices can align? How long could your organization thrive without a real picture of your financials?