CFOs reveal their biggest FP&A (Financial Planning & Analysis) Modelling concerns as file linkages, broken formulae and lack of time to create and analyse multiple scenarios
By Simon Hurst, ACA, a chartered accountant who regularly lectures on the subject of spreadsheets throughout the UK and Europe. Much of Simon’s writing concerns his belief that £billions is wasted each year by organisations through inappropriate and inefficient spreadsheet use. Simon was part of the ICAEW team that produced the influential documents: ’20 Principles for Good Spreadsheet Practice’ and ‘The Spreadsheet Competency Framework’.
Individual Excel spreadsheets can be complicated and confusing enough but, when links to multiple other spreadsheets are also involved in FP&A Modelling, problems can increase dramatically.
In a recent webinar run by the Institute of Chartered Accountants in England and Wales in association with Synapse on how to resolve FP&A Modelling challenges, some interesting insights were revealed during an online poll. File linkages and broken formulae came out on top with 44% of respondents saying they see this as a major challenge, followed closely behind by 36% of respondents citing creation and maintenance as their main worry.
Excel is loved universally because of its immense power and also because of its flexibility. However, it is this very flexibility than can cause the most problems. What starts off feeling like the freedom to be creative, and to use hard-earned skills to their utmost, can quickly turn into the nightmare of struggling to track down seemingly untraceable errors through a maze of formula references. This is particularly true when having to deal with spreadsheets created by others and over 10% of those who took part in the webinar poll say that the direct costs of wasted management time represents a significant and ongoing obstacle.
There’s a possibility that most of the time spent in Excel is in the areas where accountants’ skills are least valuable. The real skill lies in understanding what is being modelled and working out how to translate this understanding into a grid-based model. At the other end of the process, expertise can be used to report the result in a way that communicates the message behind the numbers with maximum clarity and impact. However, it’s probably the mechanical bit in the middle that takes most time: entering thousands of formulae, checking and testing, and often troubleshooting problems and issues.
Amongst those attending the webinar, the sheer lack of time to create and analyse multiple scenarios was regarded as the largest business problem facing finance teams today with half of respondents citing this as their primary concern.
To replace the mechanical element with an automated process would allow the opportunity to focus skills in the areas where they can provide the most benefit. More general developments in the world of spreadsheets suggest that the time might be exactly right for organisations to consider seeking new ways to maximise the benefits, and minimise the risks, associated with spreadsheet use. It is this risk of publishing unreliable data that is galvanising a move to simplify the modelling process, with a third of those who took part in the online poll expressing worries about data reliability.
A newly-developed, simple Cloud-based Excel add-in, which is discussed during the ICAEW webinar, addresses the concerns surrounding the use of Excel in FP&A and seeks to make it possible to retain all of Excel’s flexibility whilst adding the benefits of remote access, control, auditability and integrity.
By using the Cloud, issues with remote access, collaboration and workbook proliferation can also be solved. The Cloud can make models securely available to all authorised users at all times, and wherever they happen to be, with enormous practical benefits and can also avoid the need to create multiple, potentially conflicting, versions of the same spreadsheet that are then distributed via email.
This has great advantages for organisations of all sizes. Even an individual would benefit from the increased convenience and simplification of the modelling process. For large organisations, one person can be working on the costs side of the model, another on growth projections and staff in remote entities can update their actuals into the rolling forecast – just as they would with SAP or any 6-figure modelling system – but now with desktop Excel.
Can a simple Cloud-based Excel add-on deliver the seemingly impossible ideal of ensuring vital structural integrity and control, without compromising the freedom and flexibility that is such an important part of the fatal attraction of using a spreadsheet?
There have been many attempts in the past to tame Excel, but most have secured only niche acceptance at best, and none have really changed the way that the majority of Excel spreadsheets are constructed, used and managed. The time might be right for a radical change in our relationship with the spreadsheet.
Several factors are converging to change spreadsheet expectations:
- There is growing recognition of the need to control the spreadsheet habit, not only to reduce expensive and career-threatening errors, but also to avoid the £billions lost through the insidious waste of time and resources caused by poor spreadsheet design and inappropriate usage;
- The chasm between spreadsheet skills and database skills is being bridged by Microsoft’s incorporation of database methodology into the heart of Excel;
- A new generation of spreadsheet users will find the idea of a single document fixed to a single device very restrictive, having become used to the freedom provided by mobile apps and the Cloud. That same generation will also be more ready to trust the security of their data to the Cloud.
Accepting a little background help with spreadsheet structure and management with the help of simple Excel add-on can free up time to unleash the real power of Excel to concentrate on ensuring that robust spreadsheets are created with sufficient impact to drive correct business decisions.
The ICAEW webinar – A new and practical approach to FP&A Modelling Problems – is available now to watch as a download and the accompanying white paper written by Simon Hurst ACA & Dr Josef Baker PhD looks at how it is possible to harness the power of spreadsheets and eliminate their disadvantages with CloudModeller.