Shock, horror - it's time to replace budgeting spreadsheets   4th September 2006 Maybe it is because we are nearing the end of British Summertime and news is thin on the ground that Business Objects comes out with a white paper “Taking Human Error out of Financial Spreadsheets”. The notion that spreadsheets are prone to error and leave companies vulnerable to reputational risk is hardly news, but it is interesting to dwell for a moment on why the message isn't getting through and what can be done about it. It's curious to consider that there is a whole industry dedicated to persuading financial users to abandon their spreadsheets but almost no-one suggesting that organisations should keep them. However, the reality is that spreadsheets are a part of the fabric of the finance function and regardless of any warnings, companies are going to use them. Anyway, the suggestion that every spreadsheet is riddled with errors is scurrilous. Finance professionals are only too aware of the issues and for high risk spreadsheets often take extraordinary steps to check and re-check them, documenting them, auditing them, building in validation routines, protected areas and password access. Many large organisations successfully manage protracted budget cycles without incident, but there are of course well documented blunders that hit the headlines. For all of the potential types of spreadsheet error raised in Business Object's white paper, such as broken links, referencing errors, formula errors, copying and input errors there are balancing benefits. For example, spreadsheets are well understood worldwide, they are inexpensive, easy to build, use and understand, with no specialist programming knowledge. So, no matter how sincere the suggestion that spreadsheets can be dangerous, users are unlikely to be persuaded to discard them purely on this basis. It's a problem familiar to Steve Semenzato, CEO of Cluster Seven, an organisation that specialises in spreadsheet management. Cluster Seven has been targeting the financial services industry and in particular trading spreadsheets, where any errors can be extremely costly. Cluster Seven's groundbreaking technology, automatically tracks and reports on high risk changes in nominated spreadsheets. For example, it can detect when a formula cell is mistakenly overwritten by data – a situation that often gives rise to error. Although Cluster Seven is having some notable success with its groundbreaking software, Semenzato and his sales team have faced an uphill struggle in persuading organisations to take their solution seriously. He told FSN, “There can be literally thousands of business spreadsheets in use across an organisation and no-one has overall responsibility for them. So you can't find someone who has a budget for spreadsheets or could launch a project to fix them.” A much more persuasive argument, (which Business Objects makes to its credit), is to highlight the process inefficiencies surrounding the use of spreadsheets, such as the inability to store and query large volumes of data, or the absence of a workflow engine to manage the intricacies of budget distribution, submissions and approvals using Excel workbooks. By using a multidimensional database for storing budget data, business logic and financial intelligence, organisations can simplify maintenance, eliminate common spreadsheet errors and enjoy the benefits of much more rigorous analysis in one foul swoop. Furthermore, instead of banishing spreadsheets they can be dynamically linked to the database and act as a ‘window' on the system, giving users a familiar user interface without any of the major disadvantages normally associated with Excel. If a workflow engine is also built into the system, then budget submissions can be tracked in a collaborative environment so that any changes are visible to those that need to know and can be approved or rejected as appropriate. Experience shows that using a workflow system to support a budget process greatly reduces the time involved in completing a budgeting cycle compared with emailing spreadsheet attachments backwards and forwards between budget holders or between cost centre mangers and group finance. It also improves data quality, not only by eliminating spreadsheet errors but also by encouraging budget holders to discuss key assumptions and KPI's before they are finalised. Others maintain that this increased collaboration helps to reduce the number of budget iterations. Business Objects is of course not alone in providing this kind of facility. Hyperion, Cartesis, SAS, Cognos, Clarity Systems, Extensity, Applix, and Actuate to name but a few, have varying degrees of budgeting, planning and forecasting solutions. Some are highly dependent on a Microsoft environment but others straddle a wide range of technologies. At last the business performance management industry has bowed to the inevitable and acknowledges that spreadsheets are not going to disappear. It has modified its sales message to be much more spreadsheet inclusive, recognising that spreadsheets have a place in financial processes provided they can be nailed down and controlled. But it is interesting to note that spreadsheets are not necessarily the reporting tool of choice in all functional areas – one of the reasons that Applix recently acquired Temtec, a provider of self-service analytic software for $14.5 million. Explaining the rational to FSN last week, Martin Richmond-Cogan, of Applix said, “When analytical applications step outside of the finance function and into other operational areas of the business, the users are far less familiar with and dependent on spreadsheets. They need a different and more intuitive kind of interface and this is one of the reasons that we bought Temtec.” It remains to be seen whether Business Object's message falls on deaf ears. As they say, “Spreadsheets were not designed to fulfil the wide range of interconnected functions they are now used for in many organisations.” It is by no means a unique or novel message, but that doesn't make it any less important. Related FSN Articles White Paper "Process automation for cost savings, efficiency and compliance" FSN Product Review Cognos 8 “Performance Management fit for the whole organisation”
About Us Privacy Policy Contact Us Copyright © 2006 FSN Publishing Limited. All Rights Reserved. Use of this website signifies your agreement to the Terms of Use.