Member Article

Top five dangers in using spreadsheets for business processes

Organisations have long been warned by experts against using spreadsheets to perform critical business processes. Yet many continue to cling to spreadsheets in spite of the dangers and seem reluctant to countenance change. However it seems that many users are not aware that change is even a possibility.

A survey conducted by California based Ventana Research found that only 49% of respondents were aware that there are better alternatives to spreadsheets for performing critical functions. 19% said they were not aware while the remaining 32% said “don’t know”.

Spreadsheets are a great tool for certain tasks e.g. ad hoc analysis, storage of small data sets and creating simple models. However, when they are relied upon too heavily and put to use for tasks beyond what they’re designed to handle then the damage caused can be greater than most realise. Here’s a list of the top five problems that can arise with an over reliance on spreadsheets.

1 Multiple versions of the same spreadsheet compromises data integrity

Two or more versions of the same spreadsheet with inconsistent data are common. This problem occurs because spreadsheets aren’t bound to a single, unified source. Even if the original data is downloaded from the same place, such as a financial accounting system, collecting it at different times can result in mismatched spreadsheets. Additions or deletions made to some versions but not others can also create variances.

According to Ventana Research, nearly half of enterprise-sized companies have experienced this problem - 44% of survey respondents said they wrestle with multiple, inconsistent spreadsheets. Comparatively, 34% of large companies, 20% of midsize and 23% of small also confirmed the existence of multiple versions of the same spreadsheet.

2 Errors go unnoticed … until they bite you in the bum

Checking for errors in spreadsheets is a thankless task so errors can persist unnoticed. There are even documented cases of errors in spreadsheets escaping the scrutiny of professional auditors. Ventana Research shows just how prevalent errors are: 35% of survey respondents said they were aware of data errors in the spreadsheets used for their organisation’s most important processes.

While most errors are innocuous, some are not. Take the synchronised swimming events in the London 2012 Olympics. When the second round of ticket sales for the event took place it was oversold by 10,000 because 20,000 was entered into a spreadsheet as the number of available seats rather than 10,000. A small spreadsheet error had a huge impact for 10,000 people.

3 Spreadsheets burn up an individual’s time

People’s familiarity with spreadsheets saves time and money up front as training is often not required. However, any savings are lost due to spreadsheet maintenance. Survey respondents said they spent approximately 12 hours each month “consolidating, modifying and correcting the spreadsheets they collaborate on with others and reuse frequently”. The majority of time users spend with spreadsheets isn’t for doing complex work - they’re simply trying to find and correct errors, another weakness of the tool.

4 Spreadsheets waste company time

Completing month end faster and more efficiently is an unchanging goal for finance managers but departments that use spreadsheets for the process are at a considerable disadvantage. According to Ventana Research, 54% of companies that characterised themselves as substantial spreadsheet users take seven or more days to perform the month end. And it’s not just the month end process that is slowed. Spreadsheets can bog down other processes in many different ways that have a noticeable impact on how long it takes to get work done. Spreadsheets can be fast and easy to set up, but when they’re used in collaborative, repetitive enterprise processes they often become time wasters.

5 Limited oversight with spreadsheets

Spreadsheets offer users a lot of freedom but that brings responsibility particularly in the control of sensitive financial or personal data. Data needs to be controlled in a single, protected data source to remain accurate and secure. This inevitably means relinquishing the control of such data from spreadsheets in favour of off the shelf or bespoke management software. Doing so ends resource heavy activity, enables auditable data updates and ensures secure access to that data.

This was posted in Bdaily's Members' News section by Russ Gallagher .