A minus sign caused a $2.6 billion mistake.
A major financial services company had sent a letter to shareholders explaining that they would be getting a $4.32 distribution per share, thanks to the fund’s performance.
Unfortunately, during the estimation process, an accountant forgot a minus sign, turning a $1.3 billion loss into a gain. The result? The spreadsheet was off by $2.6 billion, the distribution estimates were wrong, and the company was in a very uncomfortable spot with investors.
Now imagine making a similar mistake at your company. How much is a 5% loss on your annual revenue? Imagine how reporting that to your board as a gain could ruin an organization’s planning and budgeting for the year.
The truth is, issues with error checking is only one of the problems with using spreadsheets, like Excel, that can cost a company money.
The Costly Problems with Excel Budgeting
It might seem like a cost savings to use spreadsheets for your financial planning and budgeting. And in the earliest days of your business, it probably was. You already had the software tools available to you, and setting up a spreadsheet for the small group that needed to manage financials was quick and easy.
But as organizations grow, so do the complexities of its financials and the importance of accuracy in budget numbers. The costs associated with using spreadsheets goes far beyond the cost of the software.
Scaling Issues and Errors with Spreadsheets
Managing financials, budgets and planning aren’t difficult when there are only a few people or products, few suppliers, and little in revenue.
However, as your business grows over time, you may not realize the added complexity to your spreadsheets. Macros and formulae once created to simplify input can now easily break and take multiple calculations with it. Also, with more people entering data into these sheets, the likelihood of an issue increases.
How do you share your budgets? Are they on a common server? Or does your workflow consist of one manager mailing the sheet to the next?
If you can easily email a spreadsheet to colleagues, they can easily email it to others, including accidentally sending it to a client, or worse, purposely sending it to a competitor.
Sharing it on a common server can also cause issues. Not every employee needs, or should have, access to the company’s financials or planning data. But employees with access to the server may also have access to the spreadsheet, depending on how your access control is configured.
Lack of Collaboration and Workflow Management
Excel’s collaboration tools have improved, and Google Sheets has tools for sharing documents. However, neither of these offers true collaboration. This can lead to data being overwritten from one user to the next and almost no version control inherent to the application.
Instead, version control is typically handled by renaming files as each contributor completes their work, or allowing each contributor to maintain their own version, which must then be manually reconciled later. In either case, in the manual effort of combining different spreadsheets or in managing workflows by keeping track of who has completed their edits, it is a time sink for the organization.
Lack of Integration
As your organization has grown, so has the number of systems that help you manage it. The data needed for your financial planning and budgeting comes from many different systems in your company. That data isn’t automatically fed into your spreadsheet. Instead, it must be pulled from the source and incorporated into your documents.
As with any manual process, mistakes can occur. Without intensive auditing of the data, it’s all too easy for a figure to end up in the wrong column, or a row to be added to the wrong sheet. Realizing there is an error can be an unpleasant surprise. Finding and correcting it can be time-consuming and difficult.
Few organizations have an abundance of resources sitting idle. Every person is critical to the success of your company. So, when those people must be pulled from important strategic projects and tasks to chase down incorrect or misapplied data, that slows down the pace of business growth. But errors in financials can negatively impact a business’s decision making. While a spreadsheet may seem like a cheap and easy solution to a company’s planning needs, in reality, it costs much more than you realize.
Centage Corporation’s Planning Maestro is a cloud-native planning & analytics platform that delivers year-round financial intelligence. With Planning Maestro, Centage offers the sophisticated features needed by small and mid-market organizations to integrate budgeting, forecasting, and deep data analysis within one easy-to-use, scalable SaaS solution. For more information on how to modernize your office of finance with intelligent planning, view our product demonstration video, or call 800-366-5111.