When it comes to financial reporting, Excel is the go-to for many companies, from small start-ups to larger corporations. In fact, as recently as last year the Financial Executives Research Foundation reported that 69% of companies surveyed continue to use Excel as their main tool for budgeting and planning, despite all of the issues with using spreadsheets for this purpose.
Using Excel has cost companies millions of dollars because of issues with the spreadsheets. JP Morgan lost billions, causing Forbes to dub Excel the most dangerous software on the planet. Even worse, as these companies rely on Excel for budgeting and planning, they also turn to this software for reporting, which magnifies the underlying problems with using Excel for financials.
The problems with financial reporting in Excel focus on two main areas: the manual nature of Excel reporting and the complexities in building visual reporting from the data.
Manual Financial Reporting Issues with Excel
Issues with errors in Excel are both well-known and widespread. While reviews and workflows have improved somewhat over time, a study done in 1995 showed that as many as 88% of spreadsheets contained errors.
When using spreadsheets for financial reporting, these errors are amplified. Obviously, incorrect entries and miscalculations result in inaccurate reports. But moreover, the frequency of errors erodes trust in the reports themselves. The solution? Multiple rounds of audits and reviews to help ensure accuracy.
But manual entry and mistakes in formulas aren’t the only areas where Excel causes reporting problems. The reports themselves must be created manually, and then recreated manually, every week, month and year.
Plus, Excel reports are created off static data, meaning that they do not dynamically update in real-time as changes occur, so financial reports are out-of-date before they are even complete and analysis is done on old data.
The Problem with Visual Reporting in Excel
Leaders and executives have become accustomed to visual reporting. Charts and graphs make it easy for them to rapidly understand what is going on. Dashboards make it simple for viewers to understand the relationship between data.
Excel makes both creating and sharing visual reports challenging. Chart wizard is meant to make visual reporting with the software easy. Instead, the tool is slow, inflexible and complicated to use. Choose the wrong rows or cells? You’ll need to start from scratch. Decide you want a bar graph instead of a pie chart? Start from the beginning. Excel was never meant to be a visual reporting tool.
Once done reviewing a report, you’ll likely want to share it. Excel falls short here, too. If you’re looking to share your charts and graphs, you’ll have to send a static file. If they can view the files (it’s common for these visuals to break depending on screen size and other issues) the receiver then isn’t able to manipulate the data. They can’t change numbers to see how different elements affect the reporting, and they can’t drill down to gain greater understanding of the data’s relationship to other factors.
Excel was never built as a tool to create reports meant to influence how companies plan their financials. When it comes to financial reporting, Excel just doesn’t hold up.
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