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Spreadsheets: The Silent Killers of the Finance Department

In support of the AP team’s business case for automation, studies show 88% of accounting spreadsheets have some type of error. Finance department leaders must embrace the digital transformation by adopting tools to automate critical financial processes.

The classic spreadsheet is past its prime and has become the silent killer of the finance department. Accounting spreadsheets allow too much room for error. And the process is manual, time-consuming and highly dependant on individuals informal routines and know-how. 

Today, finance department leaders must embrace the digital transformation and adopt tools to digitize and automate critical financial processes. The AP team should present the facts and statistics to support their business case for automation. Show the C-suite how they can put their organizations in a better position to grow and scale, and drive more efficiency and effectiveness for the finance organization.

Two Major Problems With Accounting Spreadsheets

Studies show 88% of spreadsheets have some error. Those include hard-coded formulas, hidden fonts, ranges that don’t contain numbers that they should, circular references. When you get into complex calculations with multiple tabs and information coming in from somewhere else, you get data that are manually entered, leaving opportunity for errors. If multiple people work on the same spreadsheet and some hard code numbers while others use formulas, then it’s easy to imagine how messy this can get.

The second main problem with spreadsheets is the manual entry. By definition, this is a time-consuming and resource-heavy task. Not to mention how tedious and demotivating it can feel for the finance professionals having to spend their valuable time on this over and over again. In fact, companies still relying on spreadsheets are at risk for errors and inaccurate financial reporting. More importantly, organizations that don’t embrace digital transformation put themselves at a competitive disadvantage by inefficient use of resources for routine activities not adding value to the overall business success.

Modern technology solves both these problems by providing tools to capture, collect and store data, eliminating the need for spreadsheets and dramatically increase the security and accuracy of reporting. Also, the tools enable many processes to be automatically performed freeing up finance department staff for more strategic and value-adding tasks.

Errors Lead to Financial Fiascos

Spreadsheets are notably flawed, and errors may lead to financial fiascos. These costs can mount if people rely on unpredictable spreadsheets rather than harnessing the power of digital automation tools. Research has found that up to 90 percent of all accounting spreadsheets have errors that affect their results and are referred to as hazardous by tech pros

A Forbes article on this topic lists some reasons why spreadsheets are particularly vulnerable to human errors:

  • Users do much of the spreadsheet development themselves.
  • The spreadsheet development process is usually informal, with little planning, and no quality assurance.
  • There’s no version control for spreadsheets, that is, no system to ensure that users can find and use the latest and best version.
  • Spreadsheet developers rarely create satisfactory user documentation. 
  • Spreadsheets don’t create audit trails, so you don’t have good records of how and when formulas or processes are changed, or of facts behind outputs.
  • Merely using the spreadsheet creates opportunities to introduce new errors into both data inputs and calculations.

For large spreadsheets, the issue is how many errors there are, not whether an error exists.” (What We Know About Spreadsheet Errors, Raymond R. Panko, University of Hawai’i)

The Competitive Advantage of Digital Transformation

Cutting-edge companies are adopting digital tools with automation functionality to get easy access to data and information in real-time. When companies use digital tools to support essential business processes, such as accounts payable, accounting, budgeting and forecasting and connect these using cloud technology they can ensure data is accurate, up to date and consistent. 

In fact, implementing automation is a real competitive advantage in today’s marketplace. Using spreadsheets and manual processes will slow down business operations and add massive resource costs to the bottom line. Plus the risk of errors, inaccuracies and reporting issues when data is hidden in spreadsheets. The staff that was previously busy entering data into spreadsheets can instead focus on strategic analysis of data to determine past, present, and future patterns to become more competitive rather than being left behind.

Excel just wasn’t designed to do some of the heavy lifting that companies need to do in finance,” said Paul Hammerman, a business applications analyst at Forrester Research Inc to the Wall Street Journal.

Digital transformation might sound like a huge project to take on. But it should be seen as a long-term strategy and mindset that all business leaders need to understand and apply to their organization. It is recommended to apply a step-by-step approach and review all internal processes currently using spreadsheets and manual tasks. How can automation technology help to remove the manual work and eliminate the need for spreadsheets in each of these tasks? Start with an isolated process and learn from this implementation. Once the transformation has begun, no one would want to turn back to those accounting spreadsheets. 

The accounts payable process is often an excellent place to start introducing automation in the finance department. Today there are many AP automation solutions available on the market for companies of all sizes, often cloud-based that can easily be integrated to the existing financial systems for data synchronization and reporting. 

CFOs Are Taking the Lead

CFOs are taking the lead when it comes to retiring spreadsheets and introducing digital transformation and automation. They understand the value of having real-time access to accurate and timely data for reporting purposes. Also, the visibility into financial data that modern business tools provide is a key to regaining control of data and processes for the CFO. 

As many CFOs take on extended responsibilities acting as the advisor for critical business decisions throughout the organization, it is crucial that the data to support analysis is available and accurate to ensure informed business decisions. Spreadsheets cannot and should not be used as data source for critical analysis and conclusions for so many reasons. The main one is - the data from spreadsheets cannot be trusted.

Companies that fail to embrace automation technology are allowing the secret killers of the finance department - obsolete accounting spreadsheets - to take over. Modern technology is available to remedy the spreadsheet decease. Dare to take those first steps of the digital transformation journey and experience the difference by presenting your business case for automation to the C-suite today.

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