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Excel errors can cost your company billions – but there is a better way

Every finance team on earth has made use of Excel in the past, and will continue to do so in the future. And it’s not hard to see why: Excel is an excellent spreadsheeting and personal productivity tool. It’s easy to use, flexible, and for the advanced power users it contains a huge array of more complex features that can partially automate many of day to day calculation tasks. 

Excel will likely always have a role in supporting finance, planning and analysis. However, problems start to arise very quickly when Excel spreadsheets are the primary or even only tool being used by your FP&A teams. 

The perils of Excel 

Excel’s main strengths are also its main vulnerabilities. It’s designed fundamentally as a personal spreadsheeting tool to help individuals track and calculate specific sets of data, and that means it’s siloed by design. It was never intended to be a collaborative tool, used by many. And when numerous teams all rely on different Excel sheets to provide or collate data inputs across an entire organization, it becomes almost impossible for anyone to keep track of what is and isn’t true, and what data is and isn’t up to date. 

For this reason, Excel is also extremely resource intensive. Individuals and teams relying on Excel spend a great deal of their time chasing down, amending, collating, and reviewing different files to attempt to reconcile a ‘single version of the truth’. 

Excel’s flexibility and feature density can also come back to haunt its users. Complex custom formulas used by one person may be unintelligible to another and are fragile structures that break easily. Leading to a mess of non-functional lookups, circular references, #div/0 errors, cell format errors, invalid or missed numbers. 

This makes Excel an inherently error prone tool for financial planning and analysis. It’s only as good at spotting and amending errors as the people using it. (And nobody’s perfect.) 

Related is the problem of version control: new information is always becoming available, and no plan survives contact with reality for very long, even with shared files. We’ve all had to deal with file names like GLOBAL_FINANCIAL_STRATEGY_FINAL_FINAL_V2_UPDATED_FINAL.xlsx as various different sets of eyes and hands work on documents we’d assumed were finished. It quickly becomes impossible to know which version of reality you’re actually dealing with. 

The cost of taking the less expensive option – some examples 

Dedicated FP&A tools, of course, don’t come without a price tag – both in terms of capital and operational expenditure and in staff training. But using Excel can be significantly more expensive in the long run. You could end up spending as much as $6 billion on your Excel habit. 

Fidelity Magellan found this out the hard way as far back as 1995, when an omitted minus sign on a net capital loss of $1.3bn accidentally caused it to be treated as a net capital gain. This lead to their dividend estimate being off by $2.6 billion and, presumably, to some incredibly awkward shareholder discussions. 

Over the years, Fannie Mae, the University of Toledo, and the 2012 London Olympic Games have all suffered losses ranging from a few hundred thousand to just over a billion dollars, all over what most people would see as “trivial” Excel errors. 

They’re far from the only victims. In his book Humble Pie, Matt Parker relates that in one incident JP Morgan Chase lost as much as $6 billion in 2012 thanks in part to figures on value at risk being incorrectly copied and pasted between files without anyone doing their due diligence. (We say “as much as” $6bn because the figure is apparently impossible to calculate definitively.) Despite many of these examples now being more than 10 years old, Excel is still being used. 

And these are by no means isolated incidents: the European Spreadsheet Risks Interest Group estimates over 90% of all spreadsheets contain errors and 24% that use formulas contain a direct maths error in their calculations. (Check out their website if you have the time, there are dozens more stories and real examples of spreadsheet errors and risk exposure.) 

So what’s the alternative? 

Modern cloud-based FP&A solutions have the power to provide your organization with a single working environment and source of truth. Eliminating most of the manual work inherent in chasing down different spreadsheets, combing them for errors, and proliferating multiple “final” versions of the same plan. 

They also provide a host of other automation and AI-powered predictive/scenario planning functionality that make evolving your plans and budgets to respond to trends, disruptions, and evolving industry conditions significantly simpler. 

Unit4 can help you 

Our FP&A solution not only integrates all financial data in your business, it also has the power to integrate seamlessly with our ERP, HCM, PSA, and Source to Contract solutions. Creating a unified environment that not only makes planning easier, but creates a better experience of work. It’s helped some of our customers save up to 30 FTE work days per year thanks to simplified planning operations, sliming down from hundreds of spreadsheets to a single source of truth. 

To learn more check out our dedicated product page here. 

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