Spreadsheets, its allure, its flaws, and why it is time to ditch itLivingeshan Krishnan
The enduring longevity of spreadsheets is incredibly fascinating when you consider that it has been in existence for more than 700 years. Yes, many of us associate spreadsheets primarily with Microsoft’s Excel software. However, the first form of bookkeeping for growing businesses was designed by the Italian textile businessman Marco Datini. Datini did it on sheets of paper!
It was another century before a mathematician, Luca Pacioli refined Datini’s invention and introduced the double-entry method in 1494. It would take another 500 years before Dan Bricklin, a student at the Harvard Business School, designed the first iteration of spreadsheets as we know it today, in 1978. Bricklin’s VisiCalc was subsequently upstaged by Lotus 1-2-3 and then Microsoft Excel.
It is easy to see why this piece of invention is ubiquitous. For accountants, this tool was a godsend. It helps them collect and organise data. The columns and rows allow for information to be neatly placed, and the “sorted by” function allows you to easily find what you are looking for. Spreadsheets help accountants, and financial officers of companies do the math, requiring them only to write the formula.
These functionalities ensured spreadsheets became a mainstay in all business organisations. Such is the amount of importance businesses place in spreadsheets that it has stood the test of time and the onslaught of the digital age to retain its place in finance departments.
However, as businesses grow, the limitations of spreadsheets have become more and more apparent. The flaws of using spreadsheets have also been exposed by an increasingly disruptive and competitive business environment.
The lion’s share of a financial officer’s time is often taken up for manual entry of data. The resources of financial officers are much better spent focusing on making strategic decisions based on sophisticated presentation of data, rather than having to spend painstaking hours keying in numbers meticulously. This is also a process that is often riddled with human errors. In addition to this, spreadsheets’ limited ability to manipulate data is one critical area that hinders progress.
A study by computer scientist Felienne Hermans on the collapse of Enron in 2001 based on tranches of email with spreadsheets attached made some startling discoveries. Out of nearly 15,000 Excel files with data on them, a quarter had at least one error such as missing circular references and other finance-related errors. Below are some of the information uncovered by Hermans:
- 24% of Enron spreadsheets with at least one formula contain an Excel error.
- There is little diversity in the functions used in spreadsheets: 76% of spreadsheets in the presented corpus only use the same 15 functions.
In October 2020, the UK’s Covid-19 contact tracing system reported that 16,000 positive cases had disappeared from their database. Subsequent investigation attributed this to an “Excel error”. Eventually, it was discovered that the version of Excel that the document was saved as only accommodates a maximum of 65,000 rows of data. This came with severe repercussions for the British population as an estimated 15,841 positive cases went unreported, and this resulted in an estimated 1,500 fatalities.
In an age where data, and more importantly how you make use of it, can decide the survival of a business, it is of utmost importance for companies to make the transition from spreadsheets to more modern cloud based technologies that do not just automate tasks but also help “slice and dice” data to suit the requirements of specific businesses.
Below we look at some of the benefits that modern business processes management systems such as cloud ERPs can bring to the accounting and financial management teams of companies.
Big-picture visualisations, real-time
Spreadsheets offer data visualisations that are limited in scope and are also static. Businesses in the digital age, on the other hand, require visualisations that commensurate with the growth of data.
Cloud ERP systems offer real-time visualisations of complex sets of data, enabling businesses to make critical strategic decisions on the fly. These are the decisions that help you edge ahead in an increasingly saturated business environment.
Accurate data, free of human errors
For a growing business competing in the digital space, trivial mistakes caused by human error due to manual entry of data can be costly. In 2012, JPMorgan Chase suffered trading losses amounting to $6.5 billion after an employee mistakenly copied and pasted the wrong information from one spreadsheet to another.
As illustrated here and in the cases above, the limitations of spreadsheets on modern businesses and organisations can have dire consequences. In the case of Enron, it was one of the reasons that led to its collapse. Mistakes like these also mean businesses can fall foul of regulatory requirements and pay hefty fines.
Elimination of silos through better collaboration
For companies with a presence worldwide, managing and gathering data from subsidiaries through spreadsheets can quickly turn into a nightmare. Often spreadsheets only allow one person to access a particular file at a time.
With cloud ERP systems, people from across different subsidiaries can work on various processes from the same data in real-time. This ensures that nobody ends up working off outdated information or compromised data.
Work from anywhere, anytime, and on any device
Cloud ERP systems allow users to access work information securely from anywhere, anytime, and on any device, provided there is internet connection. This allows for the swift approvals of documents and assigning of tasks.
The convenience of being able to access this information on mobile devices ensures that finance executives have the latest information and data on their fingertips, allowing them to expedite decision-making for key business processes.
The digital world requires businesses to run agile operations in order to react quickly to changing market conditions. In a market that is in a constant state of flux, business models change, and data is at the heart of it.
Cloud ERP systems help companies with a global presence adapt quickly to these changes by offering consolidated data in a central platform that is easily accessible for all team members.
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