At a Glance
- Spreadsheets are a useful tool for business planning and performance management because of their low cost and flexibility.
- Heavy reliance on spreadsheets can lead to errors; even a small error can grow into a significant problem, exposing the business to risk.
- Three alternatives that can mitigate the risks associated with spreadsheets are reporting optimisation, data management and advanced analytics, and process standardisation and automation.
Spreadsheets are used by large corporations and small businesses alike to create detailed plans, budgets, and forecasts as part of their day-to-day operations. Most organisations spend a significant amount of time developing these spreadsheets, so it is no surprise that Microsoft Excel has over 750 million users worldwide.
When we drill down into the numbers, it becomes clear that there is a high level of reliance on spreadsheets for business-to-business invoice management. For example, a report that surveyed international companies in Asia, Europe, the Middle East, UK, and US found that 87% of finance teams rely on spreadsheets to manage accounts receivable.
While spreadsheets are a useful and popular productivity tool due to their low cost and flexibility for business planning and performance management, almost anything of value carries some form of risk. Errors in spreadsheet-based documents are common, and the more spreadsheets are used, the greater the likelihood that a small error will grow into a significant problem, potentially exposing the business to risk.
Why organisations need to move beyond spreadsheets
Spreadsheets are powerful tools, but they can also be complex and error-prone. A study published in the Journal of Organisational and End User Computing found that over 88% of Microsoft Excel spreadsheets contained 1% or more errors in their formulas.
This is because users are responsible for many tasks, from developing an appropriate structure tailored to the specific application, creating and maintaining formulas, updating spreadsheets, and maintaining tight control over the spreadsheet distribution to ensure that users have access to the correct or updated version, while preventing unauthorised access to sensitive information.
Users can also struggle with handling large datasets. As organisations expand and accumulate more data to keep up with newer projects, the limitations of spreadsheets become apparent, resulting in system crashes. The limited number of cells in spreadsheets prevents user-friendly data visualisation, leading to poor real-time decision making.
As datasets continue to grow, it can be challenging to integrate data from multiple sources into a single spreadsheet. This exercise requires manual effort and can lead to inconsistencies. The effort required to consolidate multiple spreadsheets also slows down real-time decision making, especially in times of crisis.
The limited efficiency of spreadsheets can have a negative impact on businesses. The Cash Culture Pulse 2022 found that 42% of finance teams globally that relied heavily on spreadsheets experienced a high ratio of late payments, accounting for 15%.
Better alternatives to spreadsheets
Organisations rely heavily on spreadsheets as a primary tool for data management and reporting, but the risks and problems associated with spreadsheets, such as errors, version control issues, and scalability limitations, are reason enough for organisations to look for alternative solutions. Here are three alternatives that can mitigate these risks for improved data management and operational efficiency.
1. An important alternative is to design and implement a standardised reporting framework. This ensures consistency in reporting practices, and eliminates the inconsistencies often associated with spreadsheet reporting. The reporting optimisation process extends to the use of data management suites, where customisations are streamlined to reduce complexity and improve reporting efficiency.
2. Establishing standardised processes and adopting automation can reduce the operational risks associated with spreadsheets. Automation minimises manual data entry and improves accuracy. With standardised activities and automated workflows, organisations can ensure that data is handled consistently with minimal human intervention, resulting in improved efficiency and reduced room for error.
3. Moving to a centralised data repository and data analytics function is another alternative to mitigate spreadsheet-related risks. By housing data in a central repository, organisations can improve data integrity and create a foundation for advanced analytics. The use of technologies such as artificial intelligence (AI) opens up new avenues for valuable insights, facilitating strategic decision making and improving investment strategies.
Making change happen, together
For many organisations, changing the way they do business by moving from spreadsheets to other alternatives can be a daunting task. Our team of consultants and subject matter experts can help your organisation align technology and process infrastructure with your business goals, including centralising data and applications for improved efficiency and scalable enterprise architectures.
We can also help your organisation with data modelling to centralise, organise, and prepare unstructured or spreadsheet data for data visualisation and use predictive and prescriptive modelling to drive innovation.
At Renoir, our services include the use of behavioural and cultural change methodologies to ensure sustainable change and understanding throughout your organisation. We begin the change process with initial handholding with stakeholders, providing coaching and training to ensure understanding and compliance.
Unlock the potential of your data.