For the past 30 years, Excel has been integral to businesses everywhere.

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 No More Spreadsheets: Top 5 Reasons to STOP using Excel for Planning and Performance Management.

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14 responses to “The Growing Fear of Excel and Finding An Excel Replacement”

  1. Megan says:

    We still rely VERY heavily on excel files, and I would love to see us getting away from those in the future. However, a company must consider the additional costs of adding software in place of excel, which for some companies, just doesn’t make sense at the moment.

  2. Jarrod says:

    How many times has “formula error” been used as a reason for a broken model or an incorrect number being given to someone? The more a company can move away from Excel the better, especially given the range of skill level even Finance has with the tool.

  3. Dale Hill says:

    While I agree that Excel can be dangerous for many corporate processes, and I agree that companies should move away from Excel for corporate process, I don’t see Excel going extinct in the corporate environment anytime soon. Excel is inexpensive and can do many tasks that corporate software is either too inflexible or too expensive to use.

  4. John O'Rourke says:

    Great point Dale, Excel will likely never go extinct. The headline of this article was intentionally dramatic. Excel is a powerful personal productivity tool, and can be used as a front-end to an EPM system that handles the heavy lifting. The main point is that it should not be relied on to support corporate processes, or high-risk analysis. Other thoughts?

  5. Kate says:

    It does amaze me at this point how many people come out of school and don’t use excel. Coming from the business school it was something all of us learned. It seems to already be going, but either way, user error will forever be an issue.

  6. Derek Hazelwood says:

    Excel is generational, I believe it will have a finite lifespan, however the solutions that replace it will only thrive by being as close to excel as possible.

  7. Jean Dane says:

    I don’t believe Excel will ever be extinct. I think it is a valuable tool when used appropriately. Consolidating and preparing budgets and forecasts is not a good use for excel due to the many reasons you mention in the Article, and now due to the New tools available to us which are better suited for those purposes. I still use Excel as a supplemental tool, and believe I will for quite some time.

  8. Jim Perry says:

    I agree that MS Excel is no substitute for a dedicated EPM solution. In my experience, frustration at the executive level has more to do with a lack of understanding of the metrics by Finance than simply formula errors.

  9. Brian says:

    Agreed that MS Excel is prone to error. If one link breaks, it can cause the whole model to not function.

  10. Chris says:

    Yes, Excel has its fair share of issues and is prone to error. However, I don’t see Excel (or any of the core Microsoft Office applications) going anywhere in the near future.

  11. Cassandra Price says:

    Excel or products similar will always have a purpose in the finance arena. The issue is that its purpose will be limited to ad hoc related analysis as opposed to extensive reporting such as consolidations and budgeting.

  12. Deepak says:

    Grossly exaggerated in my opinion. Every software is prone to human errors and excel is no exception. You eliminate human errors and excel comes out as a king. Microsoft has come a long way since earlier version of office. One should explore “INQUIRE” add-in provided by Microsoft and see how you can bring world class controls in your financial models. There is an inherent tendency that I’ve observed is people don’t go into the functionalities unless there is a need for the same and that is termed as “keep managing till you die” kind of attitude. It’s prevalent everywhere because most of the finance professionals are not tech oriented and don’t like to explore Excel in depth and various functionalities it provides and hence the human errors when things become complicated. People talk about inability of Excel to handle big data but they don’t want to know and learn about power-pivot that has transformed Excel into a giant BI slayer that can handle virtually any amount of data with lightening speed. We can keep harping about inabilities of Excel rather looking into within and think whether it is really Excel or someone else? Food for thought!

  13. Lee Johnston says:

    I agree. Excel will always have it’s place in finance, however it is limited and risky in many ways. Pairing the flexibility of Excel with the database and reporting functionality of Host Analytics is a perfect blend for me.

  14. Doug Johnson says:

    One of the most important and most used buttons/command in any current software package is “Export to Excel”. And while I agree Excel will be used less and less for many “heavy lifting” projects, like budgeting and planning in the future, Excel is hard to beat for flexibility and quick analysis. And with the PowerBI tools (for free, mostly) integrated in Excel it’s not going anywhere soon.

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