While such worksheets have their merits, an overreliance on this method of financial management has its pitfalls. How reliable, effective and accurate are spreadsheets for a scaling business or one dealing with increasing volumes and data complexity? How can you ensure consistency, data quality and security if processes are largely manual? Did you know spreadsheet errors have cost companies millions of pounds?
Here, we review the popularity of spreadsheets and show how complementing them with automation can supercharge your financial tracking.
Spreadsheets collate, organise and present mainly financial data in charts, graphs and more, depending on the application. They allow analysis, collaboration and forecasting. The most well-known one (and used since 1985) is Microsoft Excel, with others including Google Workspace, Quip, Apple Numbers, WPS Spreadsheets and LibreOffice.
- • Cost-effective (especially for small businesses)
- • Easy to use / require minimal training to get started
- • Accessible – they often come as a standard resource on desktops
- • Simple to manipulate and analyse data
- • Familiar
Despite the positives, spreadsheets have disadvantages including:
- • Unreliable audit trail
- • Security concerns
- • Error-prone (88% of spreadsheets contain at least one error)
- • Data control issues
- • Limited scalability
- • Functional limitations
So while spreadsheets may suit small businesses, if you’re larger or planning to scale you should think again. Not convinced? Here are 10 reasons why you should reconsider:
1. Use limitations
Spreadsheet templates can only deal with a certain amount of information. Attempt to scale for large volumes of data or file share between incompatible programs and problems may occur. While spreadsheets are great at smaller statistical analysis and calculations, forecasts and trends involving large datasets may need different tools.
Here’s an example: at the height of the pandemic in the UK in 2020, a million-row limit on Microsoft Excel’s spreadsheet software may have led to Public Health England misplacing nearly 16,000 Covid test results. This meant 50,000 potentially infected people were not contacted to be advised to self-isolate and may have gone on to pass the virus to others.
2. Human error
Relying on manual data entry, maintenance and monitoring has its pitfalls. Lack of knowledge, attention to detail, or inconsistencies within the team in updating and properly checking records, weakens data integrity. This could result in huge financial costs and poor customer service.
In 2012 J.P. Morgan suffered a $6bn loss (£4.6bn), partly down to an Excel error where it is thought a cell mistakenly divided by the sum of two interest rates, rather than the average, as well as operational errors involving copy and paste.
In the same year at the London Olympics, thousands of people were asked to return their tickets to a synchronised swimming event after 10,000 too many tickets were sold. A human data error – inputting ‘2’ rather than ‘1’ – meant 20,000 tickets were released – 10,000 more than actually existed.
And in 2008, a reformatting error by a junior associate unaware about hidden rows in an Excel spreadsheet showing contracts to exclude, meant 179 contracts were mistakenly added to the purchase agreement of Lehman Brothers by Barclays when the document was converted into a PDF.
3. Monitoring weaknesses
Properly overseeing and checking the accuracy of records on a consistent basis can be time-consuming but essential if anomalies and errors are to be noticed and corrected before it’s too late. Failing to do this can prove costly or embarrassing.
A spreadsheet error cost Canadian power generator TransAlta US$24 million after it led to the company buying more US power transmission hedging contracts at higher prices than it should have. Its chief executive Steve Snyder reportedly said the mistake was "literally a cut-and-paste error in an Excel spreadsheet that we did not detect when we did our final sorting and ranking bids prior to submission”.
In the UK, a spreadsheet formatting error led to security service MI5 collecting data on more than 100 telephone numbers they didn't need. It saw the service apply for data on the identity of numbers ending in 000, rather than the actual last three digits.
4. Lack of control
Decentralised ownership of templates and spreadsheets makes it hard to maintain a definitive single version, especially if data is being shared with and worked on by outsourced companies or contractors. When mistakes occur the outcomes can be devastating.
The chief executive of outsourcing specialists Mouchel was prompted to resign after a spreadsheet error by actuaries to which they outsourced work. The mistake meant a pension fund deficit had been wrongly valued resulting in Mouchel having to write down profits by £4.3 million.
Most people have used spreadsheets since their school days. They’re familiar, easy to navigate and widespread in the modern workplace. But serious businesses looking to grow and scale should consider widening their technology mix to avoid putting all their data management processes in one basket – especially one that relies so heavily on manual competence.
Also, often, only one person really has advanced spreadsheet skills, limiting capabilities and efficiency. What if that person leaves the business?
6. Security issues
As data management improves and develops, so do the cyberattackers. There is an increasing trend of hackers using Excel sheets, macros and other commands to deliver malware9. User education about cybersecurity is cited as one way to tackle this – but only when it’s practiced and measured.
In general, spreadsheet security is quite limited – password protection and ‘read-only’ are a couple of examples that can easily be overcome by bad actors or fraudsters. And as remote working becomes more commonplace, businesses can’t always ensure the Wifi network employees are using to access data is secure.
7. Inferior insights
While spreadsheet programs promise a gateway to business insights and myriad methods of data visualisation, building the skills to fully exploit this is time-consuming. While people can master simple functions they rarely have advanced Excel skills. Rich, actionable data is not always possible with spreadsheets and as data gets more complex, the harder reporting becomes.
8. Limited collaboration
It is often hard to collaborate meaningfully using spreadsheets because worksheets may not be centrally controlled or updated. It can be a time-consuming endeavour with progress hampered by the inability to share documents in real time. Merging content is also a thankless task.
9. Accountability gaps
A lack of version control has implications for transparency and creating a robust audit trail; it's often impossible to know who edited which cell. This could impact regulatory and compliance requirements if things go awry.
10. Undisciplined workflows
The ease of use, understanding and availability of spreadsheet applications often encourages people to customise their own versions of a master worksheet, adding or adapting it. This has obvious implications for operational accuracy, consistency and shareability. Tracking also becomes harder as the number of users grow.
There’s no doubt spreadsheet programs are a quick, easy way for a small business to catalogue, view and learn from their data in a cost-effective way in the short-term. But as data volume and intricacy increases, a more streamlined, time-saving method that offers transparency, security and actionable insights should complement or replace spreadsheet programs.
So, should you stick with spreadsheets, or should you automate?
Automated data management and reconciliation allows you to:
Automated reconciliation with Aurum
- • Save time
- • Free employees to focus on more important tasks
- • Offer richer insights for better financial decision-making
- • Easily integrate legacy spreadsheet programs
- • View data in a mobile-friendly way
- • Scale-up operations quickly and easily
We are financial data matching software specialists. For more than 14 years Aurum has been helping some of the world’s most recognisable brands achieve their reconciliation goals. We put businesses in the driving seat with their data, ensuring compliance and control with a quality product tailored for each client’s needs.
We work across industries and have a diverse client list including Center Parcs, Ladbrokes, Fullers, and Versapay. Our partnership approach ensures we’re always on hand on your reconciliation journey.
Let us show you how our technology can help support your data management and insight needs.
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