A report from F1F9 in conjunction with YouGov has revealed that UK businesses are facing ‘looming financial disasters’ through the misuse of spreadsheets within their organisations.
Due to the fact that spreadsheets are prone to human error, and in complex spreadsheets with thousands of formulas, errors can be very difficult to identify, the report highlights that billions of pounds are being put at risk daily due to spreadsheet inaccuracies.
Spreadsheets are predominantly used within businesses, according to the research, for the following reasons:
- Account preparation
- Pricing decisions
- Investment decisions
- Budgeting and forecasting
All of these financial processes are central to a business, hence why errors in spreadsheets can result in large losses or disastrous consequences for businesses.
Delft University analysed over 15,000 spreadsheets following Enron’s demise and found that 24% of all spreadsheet formulas contained errors. 755 spreadsheets had more than 100 errors in each spreadsheet. This is a staggering figure, and shows the compounding effect that one error can have when the incorrect formula is utilised repeatedly.
Within UK businesses, 16% of companies have admitted to finding inaccurate information within their spreadsheets more than 10 times during 2014. Who knows how many millions of pounds or margin percentages this could have affected for UK businesses?
The report, which was also featured in the Telegraph, cites a lack of standardisation as to how spreadsheets are used within a business, and the severe lack in training on spreadsheets as the main culprits.
Many businesses assume that all staff are competent in using Excel spreadsheets however competencies range drastically, and as spreadsheets are prone to being changed, saved and then sent out, it is very hard to instigate rigorous control over versions.
At C24, we regularly speak to customers who are struggling to manage hundreds of different spreadsheets that their businesses run on. These spreadsheets exist in many different versions, and are saved by different users, with little knowledge over who changed what part of who is responsible for which spreadsheet. This leads to inertia and confusion, and before long causes an results in an error that impacts the entire organisation.
We speak to our customers about instilling better data governance practices, through more controlled access to reporting; making it easy to view reports but putting in place standard processes to change and manipulate data to avoid errors.
Without a critical review of all of the different spreadsheets being used within your organisation, it is only a matter of time before data is lost, deleted or incorrect. The report from F1F9 says that nearly one in five large businesses have suffered financial loss as a result of spreadsheet errors, and our increasing ability to share files quickly and easily will result in more widespread and less tangible user access across each organisation. Without standard processes and best practices in place, this reliance on spreadsheets can quickly spiral out of control.