As a business owner or chief financial officer (CFO), spreadsheets may be an important part of your financial forecasting, planning, and budgeting processes. While spreadsheets are commonly used and easy to modify, they are not designed to store and protect sensitive information. So, why are so many companies relying on them to handle their financial needs?
While there are many alternatives to spreadsheets, some organizations still consider them an important part of their accounting procedures. The familiarity of spreadsheets and their ease of use mean many employees are happy to keep working with them, even though they may create serious security risks. Below, we'll analyze Excel spreadsheets security problems that come with spreadsheets and how implementing software can be a more effective solution.
Widespread Use of Spreadsheets
In past years, Microsoft Excel has dominated the business world. Over 750 million people use the application, and 63% of businesses say they rely on the tool heavily for their accounting needs. Various organizations in a wide range of industries may utilize Excel for:
By using this program, business owners and CFOs may believe they are maximizing their resources to organize and assess their stored data. With its widespread use, some businesses may see Excel as their only solution for corporate financial planning. As organizations expand, they will need to rely on more complex reporting functions. Unfortunately, Excel has very defined limits that can make it challenging for businesses to publish their financial reports more quickly and efficiently.
Microsoft Excel is not designed to be a central hub for all of a business's inventory, budgeting, and accounting needs. Still, many depend on this program for these critical tasks. The larger an organization gets, the more likely it will run into problems with the application due to having to add in manual data and changes that can lead to inconsistencies. Excel spreadsheets can also make it difficult to identify these problems if they are not caught immediately.
Security Disadvantages of Using Excel for Businesses
Since many businesses may assume Excel spreadsheets are their only option for financial planning and forecasting, let's examine the limitations of excel for business budgeting and why spreadsheets are a security risk for businesses.
Lack of Security Features
Excel may be an easier target for hackers due to inadequate encryption features for protecting your sensitive business information, such as identifiable details and confidential financial data. Even with password protection, your critical information is still vulnerable. All it takes is the wrong person to open an email attachment, and your entire system can become compromised with a virus. According to a study by Cisco, Excel is one of the top Microsoft Office formats that receive malicious file extensions.
In addition to malware, many companies may have no way of knowing if their files are being stored or duplicated by unauthorized users because they cannot review who has seen or accessed the data. If managers cannot determine or track who has the password to the spreadsheet or if it has been shared, this security breach may only become more significant.
Inability to Track User Access or Changes
Excel works best as a single-user tool. Once you start sharing your spreadsheet across your organization, you open up your sensitive information — and, as a result, your entire business — to serious security risks. Excel does not have audit trail capabilities, so it is difficult to prevent fraud as numbers, and other financial data can easily be changed by any user.
Any employee or authorized user who has access to your spreadsheet file has the power to change, manipulate, and duplicate the data without you ever knowing who is responsible for the actions. While these changes are usually made with good intentions, they can lead to significant accountability and data integrity issues.
This issue can also arise when trying to collaborate in Excel since it is not cloud-based. This means you will need to share your spreadsheet via a shared server or email and continue to share it as your report updates to new versions.
Accounting Inconsistences, Double-Entries, and Liabilities
There are several other issues your business may face depending on how you use Excel and what financial information you store in it. Some of these issues can lead to significant security breaches, including:
Accounts payable: It is easy to lose track of payment due dates in Excel or even create double payments unless your workflows and transactions are entirely managed within one system.
Bank reconciliation: Because employees can quickly modify or change numbers, you may run into false reconciliations.
Vendor master files: Anyone with access to your spreadsheet may be able to change your Vendor Master File. Without separation of duties or an audit that can track who has had access to the data, fraud can occur. As long as they have access, any user has the ability to pay themselves.
Inventory purchases and transfers: Manually tracking inventory can be a very time-consuming, slow process. It can also be extremely difficult for managers and CFOs to determine the end numbers on reports without an audit trail that can identify who made the changes.
Creating and monitoring purchase orders: Excel spreadsheets are unable to accurately track purchase orders and the user who created them. Often, this can result in double-entry issues and lead to over-purchasing or other ordering issues. Your business may see legal obligations and liabilities due to these discrepancies.
How Business Can Benefit From Enhanced Software to Mitigate Excel Risks
In addition to security, using an unreliable application like Excel can make it difficult to overcome current challenges in the financial sector of the economy. Some of these challenges include:
Inflation: Fuel, gas, oil, energy, real estate, and cost of goods are increasing due to rising inflation, with the Consumer Price Index for All Urban Consumers (CPI-U) currently sitting at the highest percentage it has been within the last year.
Rising interest rates: As the Federal Reserve plans to hike interest rates, the cost of capital, such as loans and credit, will increase and become more difficult to secure.
You might be thinking, "If not Excel, then what?" To help combat the issues mentioned above and reduce your slow, manual processes for forecasting and planning, you can implement software specifically built for your budgeting needs. With Planning Maestro® from Centage Corporation, you can benefit from a platform advanced in cloud computing and optimized for performance, scale, integration, and automation.
With our modern financial planning and analytics solution, your organization can utilize:
Accurate cash flow forecasting
Tracking budgets to actual variances
Faster publishing for financial reports and dashboards
Monitoring key metrics and ratios
Use Centage Corporation's Planning Maestro for Your Corporate Financial Planning
Now that you know the danger of using excel for company budgeting, it is critical to implement more effective, cutting-edge tools. Technology does not change so your business can stay the same. Working with more secure, optimized solutions can deliver invaluable information and allow you and your team to achieve your financial planning goals. With Centage Corporation's Planning Maestro, you can optimize cash flow forecasting with year-round financial intelligence.