When Do Spreadsheets Serve the Needs of Finance Operations?
By: Ravi Bhardwaj
“I have my spreadsheet, you have your spreadsheet, everybody else has their spreadsheets, and none of them talk to each other.” This statement from Bruce Lynn, Managing Partner of The FECG LLC, is more accurate now than it has ever been. Spreadsheets are ubiquitous and work well for prototyping and managing operations at a small scale. Almost 1.5 billion users globally use different types of spreadsheets (like MS Excel, Google Spreadsheets) to meet their operational needs. On the other hand, spreadsheets tend to be extremely limiting as the scale and complexity of operations increase.
Below are 5 key attributes of spreadsheets. Included with each attribute are the benefits and challenges you can expect to encounter given your size and the worksheet purpose.
This comparison was prepared to help you answer this question,
“Is your use of spreadsheets a good fit for the size of your business and the purpose you are applying them too? “
Spreadsheets are definitely handy for dealing with datasets with a few hundred lines. They therefore perfectly fulfil the needs of freelancers, solopreneurs, and small businesses. Their performance does not suffer significantly as long as the data is of limited size.
1. Performance
As more and more data starts flowing into spreadsheets, their performance starts decreasing. They end up taking a lot of time to update and store information, often getting stuck with users staring at the spinning wheel as they wait for the spreadsheets to respond. Quite often, users are compelled to restart the application, which results in the loss of data and most recent calculations.
2. Troubleshooting
Spreadsheets function phenomenally well with basic calculations, even with data sets that are not too small. Spreadsheets can carry out complex computations necessary for reconciliation and projections provided that the datasets are small. And perhaps that’s why most businesses start with spreadsheets to prototype complex financial processes involved in reconciliations and projections. At this scale, it is relatively straightforward to troubleshoot formulas and link between different tabs and even between different spreadsheets. Companies usually rely on a resident expert to develop different permutations in spreadsheets.
As the volume of data and complexity of processing increase, issues start surfacing. Formulas start breaking and archaic equations become difficult to read and far more difficult to troubleshoot. Figuring out different links becomes quite challenging and time consuming.
Quite often companies start depending heavily on resident experts. As the computations grow, the person or expert who set up the first version becomes a bottleneck as teams rely on them for troubleshooting. If such a professional leaves the organisation, it will be difficult to debug the old spreadsheet with its tortuous network of calculations.
3. Centralization
As mentioned above, spreadsheets function rather effectively on a small scale to bring and manage data throughout an organisation. Tabs (and even multiple files, if required) can be created for departments and/or business verticals. Files and tabs can be connected to preserve continuity through months, quarters, and years.
A growing number of business functions necessitates an ever increasing number of tabs and files. The longer the period, the more files are needed to maintain track of company processes over diverse time horizons. These characteristics result in several tabs in an ever-increasing number of files, making it increasingly difficult to combine them for a comprehensive view of corporate activities.
4. Manual Workflows
If the business activities are managed through spreadsheets, workflows largely stay manual, or rather email based. Again, this manual workflow approach works well for small organisations or early stage startups with a small workforce and less diverse organisation chart. It frees organisations from investing too much time and resources into automated internal processes.
As organisations grow and org charts become more diverse, the use of spreadsheets invariably leads to deploying manual, email-based workflows for approvals, reviews, reporting, monitoring and tracking. We have seen these played out when the customer support team was chasing the finance operations team over emails to gain updates on one particular transaction.
5. Security and Access Control
Based on the customer feedback, spreadsheets, particularly the cloud based versions, are able to provide access control. It was a much desired feature addition to spreadsheets.
While access control in spreadsheets can be managed, a user can still easily download and share the data (sometimes using third party online tools). This poses a significant risk of private information leaking and going into the hands of unauthorised individuals.
Here is more information to help you determine how spreadsheets should fit into your business, Can we really “Stop using Excel”? and ERPs and Budgeting—What the Excel?!
Resources
https://www.cfo.com/technology/spreadsheets/2022/05/excel-series-growing-pains-spreadsheet-consolidation-fpa/
https://www.adverity.com/blog/7-reasons-why-you-should-stop-using-spreadsheets
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