Finance departments rely on data accuracy to perform critical process, and many organizations use Microsoft Excel spreadsheets despite the warnings and advice against doing so by industry experts. While many agree that Excel has many downsides, most finance executives don’t make any chances because they don’t believe there is an alternative. According to a study by Ventana Research, when respondents asked if they were aware there are better alternatives to Excel for performing critical finance functions, only 49% said “yes.”
Excel does have many benefits, and companies should not stop using it altogether as there really is no efficient alternative. However, knowing the risks and how to mitigate them, while also using Excel wisely and with the right tools can help finance companies avoid data integrity issues.
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Multiple Versions of the Same Spreadsheets – Finding the “Single Version of Truth”
One of the most common issues that financial companies and departments face, is having multiple versions of the same document with inconsistent data. This happens when several people need to manage and update the spreadsheet. After it is shared and edited by numerous personnel within the company, it becomes impossible to find the “single version of truth” that has all of the updated data and changes. There are organizations that use Google Drive or other services with shared folders to prevent this from happening, as these services allow multiple users to edit the same document live in the cloud. However, these services do not have all of the benefits that Excel offers and introduce additional security and data backup risks. In a study by Ventana Research, nearly 44% of companies stated that they struggle with multiple inconsistent Excel spreadsheets.
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Using Excel and Managing Spreadsheets is Time Consuming
Excel is a complicated program with hundreds of features and capabilities. This makes it a very useful tool for managing and analyzing data, and creating reports, but it is also very time consuming. Those who are very familiar with Excel do not need to be trained, but most companies find that at least some sort of training is required for new employees. Even trained and experienced professionals say that managing Excel sheets for financial processes takes much of their time. This is not only a result of using a complicated program, but also due to hours spent every month correcting and consolidating data. Being able to prevent errors can make a significant difference in this case.
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Missing Errors is Inevitable, You Can’t Find Them All
Even after spending hours each month going over each spreadsheet meticulously, there is no way to be sure that all of the errors have been found and corrected. The more data involved, the more difficult it will be to find any mistakes made along the way, and some will eventually be missed – there is no escaping that. Errors can be in broken links, data, formulas, and more, and studies show that it is impossible to ensure error-free spreadsheets even after having professional auditors comb through each one. Mistakes like these can mean billions in losses for the company. In 2012, J.P Morgan reported $6.2 billion in trading losses as a result of spreadsheet errors in data that was used for analysis. While many errors can be harmless, you can’t really know until you find them and therein lies the problem.
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Reports Cost Companies More Money in Personnel Hours
Month-end reports, quarterly reports, annual reports… financial departments and organizations are constantly consolidating and analyzing data for reports, and it is a very time consuming process. In 2017, many finance executives stated that one of their goals is to close the books faster and more efficiently. Ventana Research states that over 50% of companies that are “heavy Excel users” take over a week to perform their month-end reports.
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Limited Governance
Excel is a very flexible tool, but that can be a problem in corporate finance. Anyone can present the data in a format that is convenient to them and modify it however they like. In addition, we already mentioned the very significant issue of multiple versions with inconsistent data, and the potential for errors and unreliable data as a result. These risks emphasize the importance of having strict control over all financial data within an organization and setting guidelines to how and where data is managed and edited.
Does this mean financial organizations should abandon Excel?
The short answer is “no”. The bottom line is that Excel is a powerful tool with may useful capabilities, and there is no good alternative currently available. What companies can do is use tools that address the above risks without taking them away from the Excel experience they’re used to.
With Datarails, companies can continue to benefit from all of the flexibility and features Excel has to offer, while increasing error detection, data integrity, sharing and version control, productivity, and more.