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Rethinking spreadsheets for financial planning

Financial Services Specialist, IBM

The spreadsheet is nearly universal in business today. From small businesses to global corporations, spreadsheets are valued for their versatility, low cost and ease of use. They are also notoriously vulnerable to errors and inaccuracies, such as:

  • Broken formulas
  • Cut-and-paste errors
  • Data governance and security issues
  • Manual data entry mistakes
  • Unstable macros
  • Version tracking and consolidation issues

In the highly competitive 21st century business environment, the accuracy of business data is more critical than ever before. As increasing numbers of businesses—from small to midsize enterprises—are realizing the competitive advantages and insights offered by business intelligence tools such as IBM Watson Analytics, the spreadsheet errors that were once minor annoyances can now represent significant added costs or losses.

These errors have become a feature of today’s business news headlines—from inadequate controls at a major global bank to financial forecasting mistakes at an international pharmaceutical corporation to human error in an Excel spreadsheet costing a local government millions. Spreadsheet errors can sometimes be so significant that they are career ending for CEOs and CFOs, who may have had nothing to do with the error in the first place. That business in general (and the finance function, in particular) is seeking a better solution beyond the spreadsheet is not surprising. Such a solution not only enables organizations to track and follow money, but it also can give them the data insights to make money.

Quantifying the challenges

The recent Aberdeen Group report Beyond Spreadsheets: The Next Level in Planning, Budgeting and Forecasting is based on a survey of 167 organizations worldwide and quantifies how businesses today are identifying and addressing the challenges of spreadsheets in their financial planning, budgeting and forecasting. A significant number of firms have highlighted the spreadsheet as a primary vehicle for many of the key problems undermining the planning and budgeting process:

  • Version control issues: With spreadsheets distributed in most firms through email, knowing which version contains the most current data is extremely difficult. This problem also contributes to the challenge of legacy or inaccurate data undermining the planning process—an issue cited by 47 percent of respondents.
     
  • Manual input issues: Most spreadsheets are completed through manual input, a process that is time-consuming, inefficient and notoriously subject to human error.
     
  • Security issues: Two key advantages of spreadsheets are their ease of use and distribution. For financial budgeting, forecasting and planning, however, these advantages also present a range of critical security concerns, from spreadsheets containing sensitive data getting outside of an organization, to employees accessing privileged information and even fudging performance and budget numbers.
     
  • Broken spreadsheet formulas: As spreadsheets are distributed across an organization, their formulas can be easily broken. With no controls to ensure that formulas are correct, errors can cascade across a company’s planning and budgeting processes.

Although spreadsheets may remain attractive tools for many organizations, given their ease of use, these numbers reveal a clear and growing need among businesses worldwide for more robust budgeting and planning technologies that retain the benefits of spreadsheets while helping eliminate their costly negative aspects.

Taking a beyond-spreadsheets approach

Beyond spreadsheets market research reveals a striking correlation between best-in-class industry leaders (the top 20 percent of respondent firms based on financial performance) and the implementation of a beyond-spreadsheets approach to financial budgeting, forecasting and planning.

"A beyond-spreadsheets approach is defined as a one in which spreadsheets are used for consumption of planning data—exported from secure, centralized applications—rather than as sources for input into the planning process. Enterprise-scale solutions that centralize the budgeting, forecasting and planning processes empower the finance function."

These solutions offer data governance and control capabilities that address the version control, manual input, broken formula and security issues commonly associated with spreadsheet use.

The Aberdeen Group research reveals that best-in-class industry leaders are more likely to:

  • Utilize a beyond-spreadsheets approach in budgeting and planning
  • Engage enterprise performance management technology
  • Maintain a centralized repository of financial and operational performance data
  • Employ enterprise software with interfaces that mirror the look and feel of spreadsheets

The return on investement (ROI) of a beyond-spreadsheets approach for global industry leaders is not limited to just addressing the inherent errors of spreadsheets. Organizations that are industry leaders in terms of financial performance are also more likely to benefit from the added-value capabilities of beyond-spreadsheets performance management solutions, such as:

  • Enterprise-wide collaboration capabilities
  • Rapid reforecast in reaction to changing market conditions 
  • What-if scenario modeling and change-analysis capabilities
  • Integrating hierarchy controls into budgeting, forecasting and planning

Learn more about the competitive advantages of advanced performance management technology in Beyond Spreadsheets: The Next Level in Planning, Budgeting and Forecasting and how IBM planning, budgeting and forecasting solutions can make your organization a Best-in-Class industry leader.