Spreadsheets – The Good The Bad And The Ugly
The first section of this article responds to the question,
Are spreadsheets serving the needs of finance operations?
Spreadsheets serve a wide range of utility which is evident from their ubiquitous presence in any organisation. Given their general purpose nature, they are used in different departments ranging from sales, marketing, HR, finance and operations. However, lately with the advent of multiple payment options, payment gateways and associated infrastructure, spreadsheets are falling short in serving the needs of finance operations.
While they are good for prototyping and for managing operations at a relatively small scale, they tend to be highly limiting for organisations with a certain level of scale. Several of their evident limitations are:
- Slow Performance - With spreadsheets it becomes quite tedious and time consuming to manage large amounts and / or complex computations. Their performance drops significantly because they tend to take a lot of time to accomplish even minor calculations or adjustments.
- Missing Centralization - Manual approach of managing finance operations lead to data residing in siloed spreadsheets with broken links and formulas. While siloed spreadsheets do work fine upto a level, after a certain scale it leads to significant amount frustration and unforced errors in analysis.
- Data storage - Spreadsheets in general serve as a poor source of data storage.
- Poor Reproducibility - A lot of spreadsheets are needed to manage finance operations with increased scale. It becomes quite difficult to manage or rather impossible to reproduce those spreadsheets. The responsibility of reproducibility befalls on the creator of the spreadsheets, thus creating a bottleneck and dependency on person in a team.
- Difficult Troubleshooting - While spreadsheets can manage complex calculations, they are not really designed to manage complex calculations on large amounts of data. So, as the size of data increases and the complexity of calculation, it becomes quite challenging to locate and troubleshoot issues.
- Broken Sharing - Even at a small scale it is extremely hard to share files because formats change and users can change formulas. Moreover, it becomes a challenge to track who has which version of the same file.
- Poor Searchability - With data residing in multiple spreadsheets it takes inordinately long time to find a particular transaction or a piece of data. Usually, finance teams find themselves jumping from one spreadsheet to another looking for the exact information. Even if they find the information, there is always a question about its veracity and whether it is updated with the latest changes.
- Data Security - For our research we conversed with finance heads of 60 organizations and almost all of them revealed that data lying in spreadsheets are quite open to security breach. In fact, a few shared that their data reached their competitors.
Section two addresses the question,
How siloed spreadsheets are hampering finance operations?
Spreadsheets continue to be a favourite among finance operations teams, largely because they are ubiquitous, inexpensive, simple to use, and require little to no training. However, due to the manual nature of financial operations, data of an organization invariably gets stuck in siloed spreadsheets leading to several issues.
Incomplete view of business
Data silos hinder the sharing, monitoring, tracking, and reporting of relevant data. The review of each department is constrained by its own point of view. Without an enterprise-wide perspective of data, it gets quite difficult to track and iron out inefficiencies.
Threat to data integrity
When data is compartmentalised, the same data is frequently saved in various databases, resulting in discrepancies across departmental data. Data may become less accurate and consequently less valuable as it gets older. For instance, if medical records for the same patient are kept in various systems, they may eventually fall out of sync.
Waste of resources
Resources are depleted when the same material is kept in many locations and when users download files to their personal or group storage. Streamlining data into a single source reduces the IT burden from purchasing and maintaining storage that may not be required and frees up valuable storage.
Limited Collaboration across the business
Using the facts at hand, teams make decisions. They will pass up chances to work with other teams and accomplish the company’s objective if they can only access the data that is accessible in their department.
Security risk
If adequate security measures aren’t in place, the security risk for the business grows if employees are keeping spreadsheets, documents, and other data on their personal devices. Because it’s challenging to determine who has access to what information, data silos also make it challenging to comply with data privacy rules.
Bad customer experience
Customers anticipate that the data they supply will be accessible throughout an organisation’s departments. However, 64% of consumers still report having to repeat or further clarify information to various company employees most of the time.
The Solution: Breaking down the data silos
Data silos must be broken down to provide valuable information and insights. Businesses will have to make investments in new technology to do this, though. These new-age automated software help enterprises plan and describe their business needs by providing an end-to-end data platform and integration flexibility.
You’ll see the advantages as soon as you make the decision to eliminate data silos and have your various databases communicate with one another. Nothing compares to having top-notch databases that have been enhanced by all the apps your company uses
The last section of this article addresses how,
Multiple parties interacting on the same spreadsheet can affect your data integrity
Multiple parties interacting on the same spreadsheet can affect the data integrity. A spreadsheet is a powerful tool for data management and collaboration, but it is also vulnerable to data corruption, especially when multiple users are making changes simultaneously. As a result, it is important to understand the risks associated with shared spreadsheets and how to mitigate them.
A report by BSG (Business Software & Solutions Group) found that the use of spreadsheets for collaboration has increased significantly in recent years, with nearly 80% of organisations using spreadsheets for collaborative purposes. However, the report also found that spreadsheets are often used without proper security controls, which can result in data corruption and loss of information.
Bain & Company’s report found that the use of spreadsheets for financial reporting has grown rapidly over the past decade, with many companies relying on spreadsheets for critical financial reporting processes. However, the report also found that spreadsheets are often used without proper controls and processes, which can result in errors and inaccuracies.
Accenture’s report on the use of spreadsheets in financial reporting found that spreadsheets are often used in a siloed manner, which can result in data inconsistencies and errors. The report recommends that organisations implement formal processes and controls to ensure data integrity, including regular data reviews, version control, and audit trails.
The risk of data corruption and loss of information can be reduced by implementing proper security controls and processes. For example, organisations can implement version control systems to ensure that only the latest version of the spreadsheet is being used, and can implement audit trails to track changes and identify the source of errors.
In conclusion, the use of spreadsheets for collaboration has increased significantly in recent years, but it is important to understand the risks associated with shared spreadsheets and how to mitigate them. Implementing proper security controls and processes can help reduce the risk of data corruption and loss of information, and ensure data integrity in shared spreadsheets.
Resources
https://www2.deloitte.com/mt/en/pages/strategy-operations/articles/mt-breaking-down-data-silos.html
https://www.talend.com/resources/what-are-data-silos/
BSG Report: https://www.bsg.com/insights/spreadsheet-risk-management/
Bain & Company Report: https://www.bain.com/insights/the-risks-of-spreadsheet-based-financial-reporting/
Accenture Report: https://www.accenture.com/us-en/insights/finance/spreadsheets-financial-reporting.
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