We all love .xls...until we don't
FUN FACT: Microsoft Excel is 43 years old (created in 1982 as 'Multiplan')
While Excel spreadsheets are widely used and offer many benefits, it is completely out of its depth in FP&A, when compared to a sophisticated tool like Adaptive Planning:
Error-Prone:
Excel spreadsheets are prone to human errors: incorrect formulas, accidental data overwrites, or faulty data entry. Using .xls for FP&A can lead to significant mistakes in calculations and analysis, dramatically impacting decision-making and financial accuracy.
Lack of Version Control:
When multiple users collaborate on .xls for FP&A, it becomes challenging to maintain version control. Different versions of the same spreadsheet can be created, making it difficult to track changes, compare data, and ensure everyone is working with the most up-to-date information.
Limited Data Capacity:
.xls for FP&A has limitations on the amount of data it can handle efficiently. Large datasets or complex models may result in performance issues, slower calculations, and increased risk of file corruption. It can also be challenging to extract meaningful insights from extensive data sets using .xls for FP&A alone.
Lack of Automation:
xls for FPA requires manual data entry and formula creation, making it time-consuming and labor-intensive. Processes such as data imports, consolidations, and transformations often need to be performed manually, which can be prone to errors and hinder productivity.
Data Security Risks:
Excel spreadsheets stored on local machines or shared via email may present data security risks. They can be easily shared or modified without proper control measures, increasing the risk of unauthorised access, data breaches, or loss of critical information.
Limited Collaboration and Workflow:
Excel's collaboration features are limited compared to dedicated collaboration tools or cloud-based platforms. Sharing and synchronising spreadsheets across multiple users can be cumbersome, leading to inefficiencies in collaboration, communication gaps, and version control issues.
Lack of Audit Trail:
Excel spreadsheets often lack a comprehensive audit trail, making it difficult to track and document changes, especially in complex models or sensitive financial data. This can hinder compliance efforts and increase the risk of undetected errors or fraudulent activities.
Difficulty in Scalability:
As business needs evolve and data volumes grow, Excel may struggle to scale effectively. Managing and updating numerous interconnected spreadsheets can become challenging and time-consuming, limiting scalability and hindering long-term planning and analysis.
CONCLUSION: To overcome these downsides, rather than use .xls for FP&A, organisations turn to dedicated financial planning and analysis tools, such as enterprise performance management (EPM) software or cloud-based CPM solutions, like Workday Adaptive Planning, to enhance efficiency, accuracy, collaboration, and scalability in their financial management processes.
Research indicates that over 90 per cent of spreadsheets contain errors, and half of the spreadsheet models used in large businesses have “material defects.”
With approximately 750 million people using Excel worldwide, the prevalence of these errors is vast. One prominent researcher aptly describes spreadsheets as the "dark matter of corporate IT," highlighting their ubiquitous yet often flawed nature.
- Marijuana grower Canopy Growth had to restate its quarterly earnings after a significant error resulted in reporting a £40 million loss instead of the actual £88 million loss due to a formula mistake. This correction led to a two per cent drop in the company’s stock value.
- An investment bank's analysis of Tesla’s acquisition of Solar City undervalued the company by $400 million after mistakenly double-counting its debt in a spreadsheet.
- Kodak had to restate a combined $11 million worth of losses to two quarters after an error had been made on Excel.
- Barclays Capital compiled an Excel report containing Lehman Brothers contracts that they wanted to acquire, but the report also contained contracts that they did not intend to purchase, as hidden rows in the document.
- The British intelligence agency, MI5 accidentally bugged over a thousand mobile phones in 2010 after a simple formatting error on excel.
- London Olympics oversold 10,000 tickets after one employee accidentally typed 20,000 instead of 10,000 into a spreadsheet cell.
- Financial giant JP Morgan became victim to a simple formula error – losing $6 billion in the process.
