The Challenges of Spreadsheet-Based Forecasting

Spreadsheets are an indispensable tool for most organizations and understandably so; it is easy to use and adaptable to a wide range of uses. Despite its benefits, however, spreadsheet software is like any other software in that the appropriateness of its use for a given function depends on a variety of factors. Consider, for example, the planning and forecasting process – as an organization grows and matures, the planning and forecasting process requires supporting technology that offers features not required by a smaller organization, including centralized administration, collaboration and versioning features. When organizations reach this critical mass, they begin to seek out a more shareable, scalable, and trackable finance solution like cloud-based enterprise performance management (EPM) software such as Oracle’s Planning and Budgeting Cloud Service (PBCS).

Five Challenges of Financial Reporting with Excel

Everyone has a favorite Excel nightmare. From incorrect or overridden formulas to employees drawing growth charts then working backward to the numbers needed to generate “the curve we want,” the decentralized nature of spreadsheets facilitates their misuse, whether intentional or not.

The potential for a spreadsheet-based solution to yield incorrect results increases with the number of users involved in the process and is often exacerbated when the users involved are not collocated. What began as a seemingly straightforward spreadsheet exercise may quickly escalate into a complex series of inter-dependent workbooks and worksheets, naturally increasing both the potential for errors and the time required to troubleshoot such errors.

Here are some of the major problems you are inviting by keeping a legacy Excel system going rather than taking advantage of new SaaS opportunities:

1. Inability to forecast accurately more than three months out. That means you can do cash flow well enough to get by, but good luck trying to project financial results for new markets or products.

2. The bomb that shows up at the worst possible time. Finance spreadsheets are likely to continually evolve, increasing in complexity and therefore in susceptibility to errors. If the spreadsheet models are not properly maintained and reviewed, errors may be discovered at the worst moment.

3. What-if scenarios are more like what-the scenarios. What happens if interest rates increase a half a percent in the next year? With a spreadsheet-based solution, it can be challenging to answer questions like these, questions which will inevitably come with an expectation that the answers be turned around quickly. Without a flexible, robust budgeting and forecasting platform, this type of scenario analysis often requires considerable overtime from those involved in the process.

4. You say “potato,” they say “tuber.” Whenever you have unique users creating and editing their own finance spreadsheets, which then must be merged to arrive at consolidated results, you will eventually encounter a mapping or terminology issue that yields skewed results.

5. Who has access to this spreadsheet? Attempting to maintain some semblance of security with a spreadsheet-based solution can be challenging to say the least. Security on network shares is normally out of the control of Finance, meaning that IT must regularly be engaged to help ensure that access is appropriately restricted. Unsecured spreadsheets are prone to unauthorized changes, improper disclosure of financial projections and a myriad of other issues.