We all have a love-hate relationship with spreadsheets.
Spreadsheets are the perfect go-to solution for quick calculations and ease of use. However, this may be where problems arise: the solution as a whole is too easy to operate.
One wrong formula—and bam—your data may go sour without you even knowing it.
Companies have lost trillions of dollars resulting from seemingly trivial mistakes committed on spreadsheets. JP Morgan Chase suffered a $6 billion trading loss in the London Whale fiasco due to a copy-paste error, while Barclays mistakenly bought 179 contracts during the acquisition of Lehman Brothers’ assets because someone hid the cells instead of deleting them.
Using spreadsheets is an easy way to quickly put together data, analyze it, and seek input from collaborating team members.
Where does it become tricky? Companies scale, sheets increase in volume and complexity, and all of a sudden: accuracy is questionable.
It is also important to realize that many elements of the 2008 financial collapse may be accredited to bankers excessively relying on their excel spreadsheets and the data that they contained.
All in all, there’s a point at which Finance teams need to draw the line on using spreadsheets. Here are seven reasons why you need to find better alternatives to spreadsheets for accurate financial modeling:
Spreadsheets results in broken financial models
Many users develop their financial models on spreadsheets simply because the application is fairly easy to get started on.
You use formulae and other functions to connect and replicate sheets and values. You also use macros to automate certain tasks. As data accumulates, the spreadsheet becomes complex, and financial models break due to:
- Incorrectly applied functions
- Human errors and oversight
- Inability to process and translate huge volumes of data
- Lack of multidimensional data models
- Outdated and siloed data
When planning at the conceptual level, when building your budget for example, spreadsheets generally get the job done. But when you start factoring in cross-functional data elements, such as cash flow and headcount plans, the “flat” data model is sorely lacking.
To surpass the complications that arise from the humble spreadsheet’s lack of flexibility and multi-dimensionality, Finance teams periodically review data and install data checks to proactively prevent errors.
Building a system of checks on top of existing financial models is difficult if not impossible. This practice also makes spreadsheets highly unreliable and often dangerous.
To ensure that this doesn’t happen, an integrated and smart business platform enables you to consolidate huge volumes of multidimensional data in real-time.
The end goal is to build accurate, timely, and scalable financial models, and spreadsheets are just not built for such functionality.
Spreadsheets Don’t Scale with Your Team’s Growth
Spreadsheets are often an ideal choice when the data volume is small, and the sheet is more or less managed by a single author. Over time, the data stored on the spreadsheet increases, and more team members start to contribute to the data set.
Spreadsheets come with size limitations and are unable to offer the agility and granularity that business data needs. This often ends up being an impediment for leaders to make decisions on the fly.
Spreadsheets are also unable to handle reporting functions or manage alternative hierarchies, due to which the data must be manually entered into cells across different spreadsheets and reviewed before they can be processed.
Finally, it’s also worth noting that scaling companies source data from multiple sources, departments, and even external vendors. Consolidation and alignment quickly turns into a versioning nightmare when all your distributed data is processed, stored, and modeled in spreadsheets.
It is hard to maintain accurate, real-time data
Based on research by the professional accounting organization, ACCA,
“...more than 90% of spreadsheets contain serious errors, and over 90% of users are convinced that their spreadsheets are error-free.”
You may continue to review sheets periodically, identify and correct errors, and fix the macros. This doesn’t change the fact that manual monitoring and fine-tuning of your models is exhausting. With large volumes of data, it may not even be possible to know if all potential errors are addressed.
Imagine repeating this process every time leadership looks to your team for answers.
While spreadsheets may be a good idea for beginners or start-ups with small team sizes, it gets complicated when the start-ups grow, and teams become bigger.
Since spreadsheets essentially have a single-user architecture but still offer multi-user options, it becomes chaotic when multiple editors access the same sheet. With this comes the added complication of access control — and the resultant data overwrites and inaccuracies.
For instance, when you invite new team members to collaborate on a spreadsheet, it can be extremely hard to determine when a particular change was made to a cell. Since there is no audit trail functionality available on the application, there is absolutely no way to verify whether the data is authentic and whether the changes made follow the latest business logic.
You are missing out on a world of integrations
Most users continue to rely on excel because the application allows them to build financial models without learning how to code.
Companies today need a transparent and easy-to-understand integrated financial planning platform that can be designed using natural language proficiency. Such platforms allow for no-code or low-code features that anybody can use to develop autonomy from IT.
Pigment is a complete planning and analytics solution that integrates with your existing tech stack, collects data in real-time, consolidates information, and enables error-free and automated data flow:
Seamlessly integrate Pigment with ERP and Accounting Systems
Pigment integrates with accounting systems, CRMs, HRIS, and more in real-time and offers a comprehensive layout of expenses, sales data, payables, and receivables.
Human Resource Data Simplified
Understand the impact of each hiring decision in terms of finances, revenue, and overall return on investment.
Improved Customer Service
With an integrated business platform, you are able to make quick and reliable decisions that improve productivity and deploy business processes that ultimately benefit the customer.
You need presentations that deliver deeper insights
For businesses to become agile and more responsive to the changing needs, it is important for internal systems to be quick and reliable.
Leadership looks to Finance teams for deeper insights that help shape important decisions for the company’s future. When earning your leadership’s trust is on the line, it’s critical to deliver flawless presentations with confidence.
Manually reviewing data, updating it, and then revising it before that key presentation is extremely time-consuming and labor intensive. Companies must plan a time frame during which they look for spreadsheet alternatives that will help them integrate their workflow.
An integrated platform will not only let you manage data securely, but it will also help you monitor daily processes and display multi-dimensional insights for the leaders to approve and base decisions on.
A potential solution lies within Pigment’s Google Sheets Connector: transport data from your Google Sheets into your Pigment financial models, and back into your presentations - all at the click of a button.
Ultimately, Finance teams need to take measures to ensure clean, error-free, and timely data is presented to leadership for confident decision making.
You need next-level scenario planning
The modern, dynamic business environment requires quick decisions.
However, the impact of each decision has multiple potential outcomes. How do you make the right decisions and prevent billions of dollars lost?
While spreadsheets are a good place to collect and arrange data, they are not the ideal solution for complex data management and responsive functioning. More specifically, spreadsheets severely underperform when it comes to scenario planning.
While spreadsheets do offer basic functionality to ask. “what if…?”, you often end up changing values in the cells, confusing the formulae and cell ranges, and making all kinds of errors that we call human.
With an integrated business planning platform, you are able to deploy scenarios without changing the original data or the model, consolidate data from multiple sources without any errors, and also enjoy a more intuitive response and insights process.
With Pigment, you are also able to visualize all scenarios simultaneously and also modify them based on other caveats.
Spreadsheets lack secure access rights
Let’s face it: when a spreadsheet has multiple authors and users, it is very easy to get lost in the maze of versioning.
From confidential business data to something as simple (and important) as a daily expense report, data must be secure at all costs.
Pigment ensures that you enjoy enterprise-level data security by way of SOC2, Type 1 final report, and is also rated with the highest possible grade by Security Scorecard.
All data on the platform is encrypted, and this also extends to all the multiple data copies across different geographical locations. With Pigment, you can control who can see, modify, and use data across different model hierarchies.
Other features like audit trails, snapshots, and identity management make Pigment one of the most secure platforms for superior access control and confident financial modeling.
Ready to take the leap and level up your financial modeling? Book a demo with us today.