Excel is a popular spreadsheet tool for personal and business use. This accessible program can accomplish various tasks, such as financial forecasting and budgeting. Excel is an easy-to-use platform for inputting numbers and getting results with simple formulas. Businesses can also customize templates to suit their unique needs.
If your business has used Excel for financial forecasting, you may have found some challenges with the program. These obstacles can become even more pronounced as your business grows and your financial planning gets increasingly complex. You may be searching for an advanced solution that meets your business needs.
Why Businesses Use Spreadsheets for Financial Forecasting
Many small businesses start using Excel spreadsheets for bookkeeping and budgeting. With these spreadsheets, you can store, organize and analyze valuable data. For example, you may use spreadsheets to plan your fiscal year or maintain your client sales list.
With Excel’s computing and analytical features, you can identify trends and sort your data into relevant categories. Excel can also perform functions relevant to your human resources department, such as organizing employee expenses and sorting worked hours. This information can help you understand workplace activities and your business’ structure.
However, there can be some disadvantages to using Excel for your company’s financial forecasting. These can become apparent as your business grows and your accounting needs get more involved.
Disadvantages of Excel for Financial Forecasting
While Excel is not necessarily bad for data analysis or financial forecasting, it may not be the best option available to your business. Excel users may have noticed some shortcomings of this software. If you are still new to financial forecasting and seeking the best solution for your business, you may first want to consider the following drawbacks.
1. Risk of Errors
Accounting errors are one of the most significant challenges businesses face when relying on Excel spreadsheets for financial forecasting and budgeting. Maintaining multiple spreadsheets requires manual data entry, which can allow human mistakes to creep in. Many spreadsheets contain errors and capacity limitations, and incorrect or outdated data is one of the problems many businesses face with financial forecasting. If you draw information from several sources, the likelihood of erroneous results could be higher.
If someone accidentally enters incorrect data, it could throw off your budget and have a ripple effect throughout your company. A single miscalculation could lead to significant monetary loss. If you have started noticing errors in your spreadsheets, you may want to switch to a more accurate system.
2. Limited Visibility
To conduct financial data analysis, your business needs to test various hypothetical scenarios. For example, you may want to project what will happen if your business experiences downtime, if production costs rise, or if demand is lower than you expected. You need to account for these possible outcomes in advance to ensure your business plans appropriately.
Since Excel has a two-dimensional framework, it can limit your visibility. The process of generating what-if scenarios and financial models or incorporating several variables at once could be time-consuming. The multi-dimensional model could also be challenging to envision, which may lead to errors and oversights. If you want to tackle financial modeling easily and get accurate results, consider transitioning to a more advanced solution.
3. Distribution Issues
Distributing your individual Excel spreadsheets can be another hurdle. If you choose to email your spreadsheets, it could leave your confidential company information vulnerable. Spreadsheets that are too large may even be impossible to email. Relying on email to distribute your spreadsheets could become a major challenge.
4. Data Security Vulnerabilities
Excel spreadsheets may have more data security vulnerabilities than more advanced solutions. While you can set up password protection for your spreadsheet, you can only use one password. Users cannot create unique passphrases for access. Instead, you must share a single password with everyone in your business who needs access. Excel also lacks role-based security, so anyone with the password can see everything in the spreadsheet.
Fraud can be challenging to prevent if there is a lack of an audit trail with Excel. Anyone with access can easily change numbers in your spreadsheets, and without independent verification, there may not be a way to catch errors. These vulnerabilities may lead to false or inaccurate information in your spreadsheets and documents, which can lead to the danger of fraud and significant risk to your company.
5. Multiple File Versions
If your business needs to share several spreadsheets throughout your company, you could have multiple versions circulating simultaneously. With a lack of version control, it’s nearly impossible to determine which spreadsheet is the most up to date and accurate. Contributors may create different scenarios with a spreadsheet, such as what-if, worst-case, and best-case, along with a final version. So many spreadsheet iterations can quickly become unwieldy and tricky to manage.
6. Lack of Stored Historical Data
Excel spreadsheets may not be ideal for storing historical data. If you decide to update a spreadsheet, you risk losing information. Losses of historical data could lead to issues with comparisons and data analysis, which makes it harder to spot trends. For Excel to automatically store historical data, an employee must enter it, so if your business regularly changes the numbers in your spreadsheets, you can lose valuable information.
7. Minimal Reporting Capabilities
If you rely on Excel spreadsheets, you may be dealing with minimal reporting capabilities and delayed reporting. Detailed reports are crucial for performing predictive analysis and helping you gain essential insights into your data. For budget forecasters, real-time financial reporting has become increasingly vital. However, Excel spreadsheets may offer limited capabilities in this area.
If reporting is a time-consuming process and ends up causing delays, you could miss a mission-critical deadline. You need reliable and comprehensive reporting capabilities to plan and analyze your company’s financial performance.
8. Broken Formulas and Templates
You can use Excel to design templates that are specific to your company’s needs and easily include formulas that perform calculations for you. When team members enter data, Excel can do automatic sums to help you develop your financial model. Templates and formulas make it easier for contributors to input numbers and get accurate totals.
Unfortunately, the data could be at risk for broken templates and formulas if you have multiple contributors to a spreadsheet. Team members may insert a column or line that breaks a formula or enter information where it doesn’t belong. You may overlook these mistakes or spend hours consolidating the spreadsheet and resolving the issues, adding significantly more time to your budgeting cycle.
9. Minimal Collaboration Capabilities
Excel is ideal for single users, especially older versions of the software. If your business wants more than one user to collaborate on the spreadsheet, you will need to share it. This back-and-forth can make collaborating more time-consuming, especially if multiple staff members or departments need to work on the spreadsheet. If you send out the same spreadsheet to various people at once, you will then face the task of consolidating all the new entries.
Fortunately, more recent versions of Excel offer multi-user features. However, reconciling can still be challenging and inefficient, especially when multiple staff members pull data from the same spreadsheet.
If you want to restrict specific parts of the spreadsheet based on the user, you may face some challenges doing so with Excel. You can make some elements off-limits, but you may not be able to customize access for each user. Additionally, if you send out your spreadsheets to several contributors, Excel does not include a way to monitor progress or track spreadsheets. If you have a larger organization, you may spend more time consolidating your data than analyzing it for valuable insights.
10. Limited Ability to Test What-If Scenarios
What-if scenario planning is essential for your company’s budgeting and financial forecasting. With what-if scenario planning, you can improve your organization’s financial performance, make decisions more quickly and confidently, and predict the future.
While spreadsheets are excellent for simple budgeting and calculations, they may not be ideal for testing what-if scenarios. The process may become even more challenging, time-consuming, and error-prone if you have data scattered across multiple folders or offices.
11. Time-Consuming and Inefficient Manual Entry
For your financial team, Excel may create more tedious work. Since manual data entry tends to be inefficient, your employees may dedicate more time to manual data entry than other tasks that can grow your business.
While Excel is better than completing a budget with paper and pen, with today’s advanced technology and companies’ heightened need for efficiency, it may not be the best available solution for your business. If your company is growing rapidly, Excel spreadsheets may take up time you cannot spare.
If your business is outgrowing Excel, you are not alone, and it may be time to switch to another financial forecasting solution.
Choose Planning Maestro® Over Excel Spreadsheets
A full-service waste and recycling company known as Amwaste, LLC, and a nonprofit trade association known as the Computing Technology Industry Association experienced issues with budgeting and forecasting in Excel that Centage Corporation helped solve.
Budgeting and Forecasting Challenges Our Clients Faced With Spreadsheets
Amwaste consists of multiple entities, each of which has a separate budget and financial forecast. Amwaste’s parent company, Matter Management Enterprises, requires a single overall budget and forecast. Each service’s unique business drivers complicated budgeting. Amwaste relied on QuickBooks, then pulled the data from this software and manually entered it into separate Excel spreadsheets for each entity. After this step, the accounting team rolled everything into a single budget.
Similarly, CompTIA was dealing with several budgeting issues, such as users getting locked out of the software and struggling to record or even access their numbers. The organization used an application that did not allow actuals or roll forward previous budgets. The finance team needed to create unique reports each month, and their budgeting process included downloading data to Excel, sorting and filtering this data, and creating individual reports.
Overcoming These Challenges With Planning Maestro
Fortunately, with Planning Maestro, we provided both organizations with a more flexible, dynamic solution to address these pain points. We know businesses are facing more and more financial struggles in the wake of current events and economic downturn, such as inflation, supply chain shortages, and difficulties securing capital. Benefits of choosing Planning Maestro for your budgeting and financial forecasting solution include:
- Test what-if scenarios
- Identify relevant trends
- Eliminate the risk of errors
- Develop monthly forecasts
- Make business planning easy
- Create simple quarterly reports
- Depend on reliable support staff
- Automate daily tasks and workflows
- Easily analyze your budget vs. actuals
- Generate driver-based budget models
- Develop accurate proposals in just an hour
- Reduce discrepancies from manual data input
- Regularly modify and monitor your financial plan
- Automatically exchange data for financial forecasts
- Improve visibility into your company’s financial wellness
- Automate integrate your general ledger with our software
- Gain insights into the future 18 months with rolling budgets
With our solution, we can help your business move from top-down budgeting to driver-based budgeting and from relying on slow, manual processes to accurate, timely, and automated forecasting.
Contact Centage Corporation to Overcome Issues in Budgeting and Forecasting in Excel
At Centage Corporation, we understand that financial planning and analysis experts, controllers, and CFOs are critical to a company’s success. That’s why we created a platform to give your finance team the necessary tools to:
- Report accurately on progress and results
- Make fast, confident budgeting and forecasting decisions
- Propose action plans backed by insights and data
- Provide your executive team with strategic recommendations
Planning Maestro allows you to test what-if scenarios, integrate data from several sources, use automated forecasts to predict cash flow performance, and easily manipulate financial models. Increase your confidence in your organization’s plan, team, numbers, and future. Contact us at Centage Corporation to learn more or watch a video demo of Planning Maestro today.
Centage provides modern FP&A software solutions that empower Finance teams to lead the way to a stronger, more agile business. Our cloud platform, Planning Maestro, makes sophisticated budgeting, planning, and forecasting easy and accessible. Intuitive automation accelerates workflows and improves accuracy, enabling Finance leaders to deliver reliable information and meaningful insights at the speed of today’s business. For more information on how to modernize your FP&A process, view our product demonstration video, or call 800-366-5111.