In my recent Enterprise Performance Management and Financial Planning, Budgeting, and Forecasting Study I asked survey takers to identify the challenges that they have faced with spreadsheets (Figure 1).
Figure 1: The Trouble with Spreadsheets
There results should not be surprising. Spreadsheets require a lot of manual work. Not only is this time consuming, but it also leads to a host of other problems including mistakes in data, incorrect formulas, and inability to connect multiple data sources. These challenges lead to version control issues including the potential for inaccurate data, as well as a lack of security.
In relation to financial planning, budgeting, and forecasting, the challenges related to spreadsheets are unacceptable. The difficulty that comes with manually sharing spreadsheets leads to a series of problems:
- Working with old or inaccurate data makes means that those that are responsible for the budgeting process are building on a rough foundation.
- Version control issues provide the potential for incorrectly sharing old forecasts with those that are responsible for attaining those numbers.
- Breakable formulas can lead to mistakes in analysis and inaccurate calculations.
- A lack of security means that sensitive numbers may be exposed to the wrong sets of eyes.
Together, these challenges make it obvious that spreadsheets alone are not the answer to your planning, budgeting, and forecasting needs.
On the other hand, there are a few positive aspects that spreadsheets bring to the table (Figure 2).
Figure 2: The Benefits of a Spreadsheet-Like Interface
These benefits mainly stem from the familiarity that typical employees have with spreadsheets. Since they use them more often, employees find them easier to use which enables them to quickly update and consume them. Interestingly, respondents also noted the shareable aspect of spreadsheets. Of course, they are easy to share, but as the set of difficulties we noted earlier showed, the content that is being shared may actually be incorrect. For these reasons, organizations want to take advantage of the benefits of spreadsheets while negating their challenges in relation to planning, budgeting, and forecasting.
Spreadsheets bring a lot of pros and cons to financial planning, budgeting, and forecasting. As such, they are typically used in some manner during these processes. In fact, 93% of all organizations utilize spreadsheets for planning, budgeting, and forecasting. But what differentiates the top performers from those that are less effective at these processes, is the role that spreadsheets play (Figure 3).
Figure 3: The Beyond Spreadsheets Approach
Leaders are more likely than Followers to export data from applications to spreadsheets. In other words, Leaders are more likely to use spreadsheets primarily for data consumption. They prefer a more secure and collaborative infrastructure that enables more advanced planning, budgeting, and forecasting features.
On the other hand, Followers are more likely to make spreadsheets their primary method of communication and interaction throughout the planning, budgeting, and forecasting process. They are relying on spreadsheets for the entire process and are therefore much more exposed to the challenges associated with spreadsheets.
For these reasons, Aberdeen recommends that your organization takes a “Beyond Spreadsheets” approach to planning, budgeting, and forecasting, by relying on more robust solutions, such as Enterprise / Corporate Performance Management to complete these processes. Many of these applications may even have an interface that mimics the looks and feel of spreadsheets. Come back to Aberdeen.com in mid-January, to read my report and understand how to take advantage of these tools.