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How to Know When it's Time to Ditch Excel

by Simon Goble on January 19, 2016

Excel is a powerful and versatile tool, but for almost every business, there comes a time when it just won’t cut it anymore.

Download the case study to find out how Tandia moved away from Excel-based  financial reporting

It’s easy for temporary solutions, perfectly adequate at the time, to become ingrained habits, which cling on well past what should have been their use-by date. Spreadsheet dependency is a prime example. 

Those working in financial institutions such as community banks, challenger banks, microfinance organisations and credit unions – may feel a duty to opt for the least expensive option whenever possible. While Excel may seem like the most sensible option, it’s important to balance the outright cost against the potential real costs to your company in terms of risk and time.

The Danger of Errors 

If precision and accuracy are key concerns – highly likely if you are using Excel for tasks such as financial performance reporting – then you may require a more sophisticated solution.

We’ve looked through a variety of reports, and the consensus seems to be that somewhere between 88% and 94% of spreadsheets have errors. For instance, this study by Carnegie Mellon University found an error rate of 94% amongst the spreadsheets of its participants. Errors included: inaccurate data, errors inherited from spreadsheet reuse, model errors, and errors in use of functions.

Such inaccuracies can cause huge issues, and there are plenty of cautionary tales, even from some of the world’s largest and most well-respected organisations. For instance, home mortgage financier, Fannie Mae, reported a $1.136 billion error in shareholder equity, as the result of "honest mistakes made in a spreadsheet". 

In fact, Excel played a key part in the infamous JPMorgan "London Whale" $6 billion trading loss in 2012. Their new, highly sophisticated value-at-risk model operated through manually completed spreadsheets, with data copied and pasted from one to another. Not only was the model not automated, but, upon investigation, a number of devastating errors were discovered in the spreadsheets. 

Spreadsheets Struggle to Scale with Growth

As any business scales, complexity grows, and the time it takes to perform tasks such as financial reporting inevitably increases. With growth, the company is likely to amass an array of new software to deal with a variety of tasks, however integration with Excel (or any management reporting utility) seldom features as a buying criterion, adding further frustrations and sinking even more time.

In our recent case study, we share the experience of Tandia, a cooperative banking institution. Following a merger, Tandia employees found that reporting was beginning to take not just days, but weeks, and they realised that the time had come to move on from Excel.

Version control issues when an ever increasing numbers of contributors are involved, data being changed or deleted by another user without notifying the collaboration group, are an obvious pain-point, exacerbated by the lack of traceability when problems do arise. 

A Lack of Specialisation 

Excel is an incredibly powerful application, ever more capable of handling complex data processing and reporting - but not without serious limitations for those performing highly important tasks. There’s not really any simple way to test spreadsheets; there is no debug; you can't trace where your data came from; and crucially, there’s no audit trail. 

In order to be a catch-all solution, Excel is necessarily simple and generalised. Its flexibility is both a key asset and a key flaw. You simply can’t access the level of industry-tailored functionality that you would get from dedicated, business-specific software. Which of course means that in the event of disaster, you can’t count on tailored support either. 

Gaps in Security

When it comes to security, communicating via email with spreadsheet attachments is clearly far from ideal, and password protection and cell locking are too weak as security measures to be adequate for sensitive data. Furthermore, spreadsheets do not have a lock out feature, creating the potential for anyone who accesses your computer to also access your information.  

It’s also far too easy for a spreadsheet to simply “go missing” or be compromised, and in the time it takes to hit “Save”, your information can be duplicated entirely. When you are working with sensitive information, it is imperative that you have robust security practices in place.  

Spreadsheet risk is so prevalent that it has its own interest group – The European Spreadsheet Risks Interest Group (EuSpRIG). EuSprIG have a whole page of horror stories, which may just be enough to finally scare you off the spreadsheets and into the arms of a proper banking BI application.

To find out more about how Tandia fared when they broke up with Excel, read our case study. 

Read the case study

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