Here are just a few reasons why:
- Spreadsheets are intuitive and easy to use - By their very design, spreadsheets are not intended to deal with the complex issues of the finance office. Instead, they were created to allow users to input a relatively small amount of data, collate and process it and then deliver an accurate accounting of such things as budgeting, financial consolidation, forecasting and reporting.
- They provide straightforward analytics – While spreadsheets are not powerful enough to allow the drawing of conclusions from non-financial big data sets, they do allow users to forecast fairly easily and with some degree of accuracy. Admittedly, spreadsheets are rife with human error but they do provide a baseline from which questions can be posed to more powerful and more accurate analytical platforms.
- They are a great front-end input solution – In a survey conducted by Financial Executives International, more than 50% of the respondents polled admitted to using standard spreadsheets as a standalone tool or as a front-end method to input data into other, more complicated systems so that they could meet their EPM requirements for planning and budgeting, financial reporting and disclosure, and analytics.
- They are affordable – With a remarkably low cost for the functionality they deliver, spreadsheets are the go-to choice for most start-up companies. The learning curve to use them is quite small and almost no formal training is required. Traditional spreadsheets are simply right “first choice” for small scale businesses. Later, as the business grows, the information can be migrated onto more powerful platforms.
- Security is generally not a problem – Access to consolidated spreadsheets is usually limited to a select group of senior executives. By simply securing the actual desktop and delivering the spreadsheet via physical means – that means thumb drives and not email – the data remains relatively secure unless phishing and human error are involved.
The Future of Spreadsheets in Finance
Despite their seeming versatility, the use of simple spreadsheets for dynamic purposes is likely to decrease. The advent of various cloud-based EPM software packages – and a new wave of solutions known as Corporate Performance Management (CPM) solutions – allows a company to take a more strategic approach to their business. In addition, these solutions allow the various divisions within a company to more easily collaborate and integrate their various contributions to the overall scheme.
This evolution is driven by more than just technological advances. Most businesses – even relatively small ones – find themselves dealing with the globalization of many of their products and services. EPMs allow them to readily handle such tedious – but necessary – processes as currency conversions while still providing accurate data consolidation and reporting.
Similarly, the acquisition or merger of one company by another leads to the need for data consolidation from multiple legacy systems. That's where EPMs come in. Finally, the “need for speed” – that is, real time reporting – is also driving companies towards the EPM and away from traditional spreadsheets. EPMs allow multiple departments to give timely feedback to the Office of Finance and allows for more insightful and informed decision-making.
In a nutshell, the role of the spreadsheet might be changing, but it's not going anywhere any time soon. It will likely live on as a dependable, easy-to-use tool for those simple tasks that don't require robust analytics or data management. And it will almost certainly remain one of the main sources that feeds data into more advanced systems (e.g., EPMs and CPMs).
