Moving beyond spreadsheets in financial planning and forecasting can improve your results, according to a report by the Aberdeen Group. According to one statistic, companies using primarily spreadsheets slow down by over 2% per year while those that have moved beyond spreadsheets speed up over 1% per year. Many studies have shown that spreadsheets have about an 80% error rate. One article attributes the cost of the problem to over $11B annually!
In the area of planning budgeting and forecasting, demands for flexibility and accountability are strong. Aberdeen’s report lists five pressures on these processes, among them inability to trace business success to its key components and the need to dynamically account for change. Many organizations experience brown-outs during their budgeting and forecasting processes because it is too long and intensive. And then when changes do happen, it is very challenging to update the information.
While spreadsheets are wonderful tools, they are ill-suited to responding to these pressures, and may sometimes be exacerbating the problems. Aberdeen’s list of issues:
1. They are not easily shared and can often bring along problems with version control.
2. They may have to be manually updated.
3. It is difficult to tell if data is up to date.
4. They can impede collaboration because employees may not understand or could “break” the formulas contained within them.
These themes are born out by more academic research on spreadsheets. Spreadsheets are rife with numbers being mistyped, or worse logic errors involving mistaken formulas or errors in reasoning. The worst errors are omission errors, in which something is left out. The time pressures required by budgeting and forecasting processes only increase the probability of these errors.
Basically, these are deployment problems. In other words, emailing spreadsheets around creates processes challenges that decrease their effectiveness and slow down the process.
Aberdeen’s recommendation is to use more automation around the spreadsheet for budgeting and forecasting processes.
SmartOrg has been working this problem for many years, and has embraced the spreadsheet as a central element of planning and forecasting. Our beta product, code-named Astro, is a spreadsheet management platform that pulls in your familiar spreadsheets, putting them into an enterprise-level web-based applications. It tracks changes, lets you compare different business scenarios, and aggregate multiple spreadsheets. In other words, it transforms your spreadsheets into dynamic, reliable and collaborative tools to support planning and forecasting.