Wednesday, 8 November 2017

Spreadsheets: a victim of their own success?



There is so much talk of digital disruption today, that it is easy to forget that one of the most significant disruptors of them all has been sitting quietly on our desktops for the past three decades. Yes, the humble spreadsheet software, most likely Microsoft Excel.

And even though my accounting days go back to the comptometer, I can barely remember a time when spreadsheets were literally that, sheets of paper spread across my desk!

And thank goodness too. I shudder to think what life would be like for accountants and companies without the multiple capabilities that spreadsheets give us. Especially in today’s data-centric world. From rapidly carrying out arithmetic involving multiple rows, columns and tabs of figures, to compiling information from various sources, to running scenarios using different figures, to analysing data thanks to pivot tables and macros, and even running small pieces of software. Spreadsheets really are our data workhorses.

So it’s not surprising that spreadsheets have escaped the finance department and are very often how finance and the rest of the company communicate with each other. It’s quite strange how everyone, whether in actual fact they do or not, is expected to have some level of Excel know-how. Designers don’t expect anyone else to be able to use Photoshop, for instance.

Yet any job title is expected to complete spreadsheet-based expense claim forms, or update a forecast with figures for next year, or apply a new budget, adjusted for a tough economy.

But sadly the spreadsheet has also become a victim of its own success. Several things typically happen when spreadsheets reach critical mass in terms of users, data or both. Spreadsheets get bigger and bigger, more and more complex, and increasingly prone to breaking, and certainly less likely to be trusted for accuracy. Only the initial author understands the logic of how it was set up, and if they leave the company, this insight goes with them.

Meanwhile as more non-financial people contribute to the spreadsheet, version control is abandoned, people do things that only make sense to them, including adding up their figures with a calculator and typing final amounts directly into the spreadsheet as plain text. (It happens!) Things happen manually, slowly and errors creep in: the domino effect of a single misplaced comma can be catastrophic, and like a needle in a haystack to track down.


Suddenly your spreadsheet is no longer saving you time or money, or giving you an accurate, up-to-date view on critical business information. But instead is a millstone that is weighing you down and putting you at risk.

A 2015 study gained unprecedented insight into the extent of this problem. Using more than 15,000 of Enron Corporation’s spreadsheets as the dataset, the study showed that:

      24% of the spreadsheets with at least one formula contained an error, and of these, six out of ten had dependent cells;
     76% of the spreadsheets used the same 15 functions -- barely scratching the surface of Excel’s capabilities.
     One in ten emails sent either included or referred to spreadsheets, and often errors in and updates to the spreadsheets were the discussion point.

Don’t you think it’s time we stop overburdening the hard-working spreadsheet? And stop demanding, or expecting, non-financial managers to get up to speed with financial thinking: after all, spreadsheets digitise existing finance functions, they don’t necessarily de-mystify them for the rest of the organisation.

The answer isn’t in closing ranks, however. I have long argued that the best way to get the right information as well as buy-in from the company, especially at budget and forecast time, is to decentralise this function to the coalface. And the only way this can happen, is by giving non-financial managers tools that are intuitive and easy to use, and don’t require them to understand what is going on under the hood. It is far more important that they are able to set, and manage their own budgets, with the room to be nimble and responsive to changing market conditions, than it is for them to navigate and understand cumbersome spreadsheets.

The good news is that this frees up the accounts department too. So instead of hunting needles in haystacks, or reverse engineering bizarre ways people have used Excel, we can turn our minds to more strategic, impactful activities.

Perhaps it’s time to give the overworked spreadsheet a helping hand?

As published Accountingweb 25th October 2017 https://www.accountingweb.co.uk/community/blogs/kevin-philips/spreadsheets-victims-of-their-own-success