After more than 30 years, you’ll still find Microsoft Excel on virtually every FP&A desktop on the planet running complex FP&A activities. FP&A professionals use Excel for anything from day-to-day analysis, maintaining adjustments, cost allocation rules, month-end reports to management reporting and forecasting and even financial modelling – and generally use it for processes that can be done far better in purpose-built tools.
Perhaps that’s a case of better the devil you know. Make do with spreadsheets or jump into unknown tech that may be costly and disrupt the business.
The benefits of Excel
We totally understand why. Excel is very flexible, inexpensive, and intuitive. That flexibility has over the years made Excel an essential tool not only for finance professionals but for everyone across an entire organisation. Everyone knows how to use it, and many know no different.
The top eight challenges for FP&A teams using Excel
Relying on Excel however might be holding you back, because despite its popularity, spreadsheet-based planning has many constraints especially in globally dispersed teams and for companies with complex modelling needs.
Here are just some of the challenges presented by using Excel.
- Using Excel is people dependent and inefficient
Excel relies on people to manually input data which is very time-consuming and labour-intensive and can impact negatively on decision-making as lots of time is lost, and planning and budgeting takes too long. That time could have been better spent on more strategic tasks.
- It’s easy to make errors that may go unnoticed
With multiple spreadsheets on the go at any one time, and a reliance on manual inputting, accuracy is difficult. It’s easy for people to make mistakes – deleting a row or cells or breaking a formula – and it’s all too easy for these to go unnoticed. When your processes are manual and you’re working with a large quantity of complex data, there is always a greater chance of human error than with an automated process.
- Excel isn’t made for collaboration
Excel can’t handle multiple users working on data all at the same time. The more people accessing and editing, the more error-prone the file becomes. You can’t tell who has changed what and when. There are also issues with inconsistency – often multiple users create separate versions of the same spreadsheet, which can result in totally disparate data, compromising data integrity.
- You can’t forecast effectively
Excel makes it challenging for companies to project the financial results for new markets or products because you’re dealing with historical data and don’t have real-time data to hand, without a lot of work in the background.
- Scenario planning is also ineffective
Members of the management team may want to see different ‘what if’ scenarios, but these can only be analysed afterwards and take a lot of time.
- There is no single version of the truth
In using spreadsheets everyone has their own version of the numbers, which can raise data integrity issues. This lack of accountability and multiple versions of the truth makes for a lack of confidence in numbers, getting in the way of effective decision-making.
- Large files are prone to crashing
When data is aggregated across multiple business units, linking sheets into a master model, Excel files can get big and complicated and are then more difficult to manage and more prone to crashing.
- Lack of security
Excel leaves your data exposed as it is difficult to control how the data is inputted and used and doesn’t provide an audit trail. There is the additional risk of your sensitive data ending up in the wrong hands.
If COVID-19 has taught us anything, it is that businesses need to become much more adept at adapting to the changing world. In today’s fast-moving and unpredictable markets, FP&A requires efficient financial processes to clearly identify the key drivers of their business and CEOs need quick interpretation of the data, and insights that they can convert to action.
We think the days of sending around spreadsheets and linking the subsidiary sheets into a master model are over. The time for real-time budgeting, forecasting, and planning is now.
The 6th Annual FP&A Trends Survey 2022 shows the need to accelerate the implementation of tools capable of reducing the time professionals spend checking reliable data and it indicates that the more time spent generating insights, the more assertive the decision-making process will be.
If you’re looking for a better way than spreadsheets to improve your financial reporting processes, please get in touch with us. Contact email@example.com.