It’s become the foundation of countless business processes, aiding in computing, financial tasks, IT projects, marketing, and so much more. It’s no wonder Excel was such a hit from the start.
With its ability to process mathematical equations, store and organize data in attractive and manageable ways, and create a variety of what-if scenarios, Microsoft Excel has long provided a critical function to businesses. Yet, many are now moving away from Excel in search of other, more modernized, technologies. Why have so many businesses suddenly decided to abandon Excel for critical business processes?
How Many Businesses Are Turning Away from Excel?
While many businesses have awoken to the inefficiencies of Excel, a lot of companies still rely on it, if for no other reason than sheer force of habit. An article published in the Enterprise Times reported that about 60 percent of businesses in the U.S. are still relying on spreadsheets, while 21 percent are moving toward other software solutions.
Why Are Businesses Moving Away from Excel?
Excel usage has been declining among businesses, particularly in the financial department. So, why is it that people are moving away from such a useful and prevalent software?
1. Excel is prone to error. When entering data manually, there is always the potential for errors. Unfortunately, especially in the world of finance, even a minor error can have a major impact.
2. Excel has low visibility. When it comes to catching errors, visibility is key. Perhaps the reason so many Excel errors go undetected is due to the fact that visibility is so poor in the one-dimensional framework that Excel provides.
3. Excel is tedious. While Excel provides the ability to calculate equations, model what-if scenarios, and aid in other complex financial tasks, it does so in a lengthy and tedious manner. It relies on a lot of manual data entry, which is incredibly time-consuming, and it can often be more of a hassle than it’s worth.
Some Major Spreadsheet Blunders that Have Instilled Fear in the Hearts of Businesses
Perhaps the main reason companies are moving away from Excel for corporate processes is due to the increasing financial risk. Countless businesses have fallen victim to fatal spreadsheet errors which have had devastating effects on the finances of their company. Fidelity’s Magellan Fund fell victim to a particularly embarrassing and costly error. They estimated that they would make about $4.32 per share, which later turned out to be false. When entering the numbers in Excel, the accountant accidentally omitted the minus sign on a net capital loss totaling $1.3 billion, in turn greatly overestimating the value per share.
TransAlta experienced a relatively minor error that cost them over $24 million in losses. The costly error was traced back to nothing more than a simple cut and paste mistake in Excel, but that tiny mistake cost them a tremendous amount of capital. That’s the main problem with spreadsheets. Humans are prone to manual errors, and yet, even the slightest of spreadsheet errors can have a crushing impact on finances.
The Growing Complexities of Financial Management
Managing revenue and planning business finances is more complex today than ever before. There are countless variables today that weren’t as prevalent in the past, all of which make financial planning increasingly challenging. In today’s world, there are more government regulations and oversight, there is an increased demand on trade which entails the need for complex currency conversions, the economy is constantly fluctuating, and the marketplace is more demanding than ever before. With all of these added variables placing pressure on businesses, managing finances is becoming increasingly challenging. Thus, many businesses are in search of improved methods of managing financial allocations efficiently and accurately.
How Do Modern CFOs Feel About Spreadsheets?
The goal of every CFO is to tackle financial processes in the most efficient and accurate way. This is perhaps why so many CFOs are turning away from spreadsheets. According to Robert Gothan, CEO and Founder of Accountagility, four out of five CFOs have cited problems in their spreadsheets, which is a troubling statistic and indicative that major changes are needed. He also notes that one of the main issues with spreadsheets is firms aren’t spending nearly enough time reviewing the data they create. This is perhaps the core reason so many errors go undetected.
The Convoluted Nature of Excel
A core reason companies are being turned away from Excel is due to its convoluted nature. Firstly, Excel documents can be difficult to organize and share. When it comes time to compile data, you need to sift through countless spreadsheets to find what you’re looking for. It is also sloppy and difficult to make sense of. According to Vineet Virmani from LiveMint, formulas can be difficult to read, formatting is haphazard, the multiple tabs lend to endless confusion, and the graphs created can be misleading and unattractive. While some of these things may seem minor on the surface, they all work to create a financial process that is frustrating and inefficient.
The Best Excel Replacement Solution
While Excel may not be going away entirely, as it still provides a variety of integral functions to businesses, it is at least making its long-foreseen departure from the world of finance. It’s clear that Excel simply isn’t providing the solution that many modern businesses need. Instead, enterprises need to become more dependent on software applications that provide enhanced agility and accuracy.
With cloud-based enterprise performance management (EPM) software, businesses can avoid many of the pitfalls of Excel, while using it as a front-end for reporting, analysis and data entry. The cloud provides a single platform for managing financial data, so you no longer have the chore of managing and organizing an innumerable number of spreadsheets. It enables businesses to automate a lot of their data entry, so the propensity toward errors can be drastically reduced. In turn, businesses can also increase efficiency by reducing the painstaking process of manual data entry.
Most cloud-based EPM software embraces Excel as a front-end, but also comes equipped with advanced data analysis tools on the back-end. This allows for multidimensional modeling of what-if scenarios that provides enhanced visibility to reduce oversights and errors.
Break free of spreadsheets once and for all. To learn more, read 5 Signs You Are Abusing Excel for Planning white paper.