The Dangers of Using Spreadsheets for Financial Planning and Analysis
Republished, 03 February 2020, Decision Inc.
The spreadsheet has become such a ubiquitous tool in finance that people hardly notice it anymore. But in a world where digital transformation requires different data approaches, does our reliance on this traditional solution pose a risk to the business?
Simply put, decades-old spreadsheets are not built to handle the complexities of modern, fast-paced businesses. Certainly, as personal productivity tools, they work wonders but can present major accuracy issues when shared across multiple users and locations. A collaborative environment is one of the critical aspects of a digital enterprise and not being able to effectively manage multiple versions and the users editing these documents can severely inhibit a business.
The issue for many organisations who continue to manage critical financial data using a traditional spreadsheet is that there is no safety check that automated Enterprise Performance Management (EPM) solutions provide.
More Than Just Numbers
At its heart, EPM solutions are focused on monitoring and managing the performance of a business utilising several key data sets (such as revenue, operational costs, and others). In recent times, there has been an evolution of EPM solutions thanks to the increasing use of cloud-based systems and approaches.
Today, there are cloud solutions in the EPM environment designed to mitigate the risk of using spreadsheets for mission-critical functions. But decision-makers need to determine which offerings provide the best fit into their current processes and systems with change management amongst users a critical deciding factor.
Certainly, cloud technology can not only improve financial processes, but also allow for more detailed planning and reporting capabilities. While many standard spreadsheet solutions do feature elements of these, they are not built for the scale required by organisations. The biggest problem is that as the spreadsheet becomes more complex, so too does the amount of time users spend in getting to the information and data that they require.
If spreadsheets were just about the figures, then they would fulfil their purpose. However, the digital environment requires a different approach – one able to put data analysis at its core and provide decision-makers with the insight required to rapidly change business strategy as required.
EPM solutions provide a way to do all these things. By using an analyst-driven approach, facilitates a greater understanding of current approaches. Additionally, it enables a business to become more technology-agnostic and not as reliant on a spreadsheet solution from a specific vendor.
Solutions providers that show a willingness to get insight into the current and future requirements of the business, and propose EPM offerings built around them, will be ideal partners on this digital journey.
The reality of a business environment where people can take up to two weeks (if not longer) to compile a set of management reports is nonsensical. It becomes even more frustrating when chartered accountants end up managing the admin behind the reporting process instead of focusing on their core functions such as detailed analysis. EPM solutions provide the means to automate the entire process and perform much more effective cost-benefit analysis.
Fortunately, businesses are moving away from these traditional mindsets and looking at how best to integrate EPM into their organisations. This presents many exciting opportunities for future growth and ones that will move the organisation further away from the risk of ‘death by spreadsheet’.