Death by a Million Spreadsheets: How Spreadsheets Lead to Fatal Errors
Spreadsheets are valuable. They are simple, cheap and versatile. But they are also overused. Many people view spreadsheets as a catch-all solution for records and data, but this expectation stretches the usefulness of spreadsheets far beyond their intended purpose. The divergence between expectation and functionality leads to improper use, and using spreadsheets to orchestrate key processes, or as multi-user and interdepartmental tools, leads to problems.
Countless companies across the globe are experiencing this so called “spreadsheet dependency,” using and abusing spreadsheets for their operational, sales, financial and marketing needs. These companies are run on what is essentially a glorified note pad and calculator. That is why Forbes has called spreadsheets “the most dangerous software” in the field of digital business. Here are five reasons you should lower your dependency on spreadsheets.
1. The Chance for Errors
While spreadsheets may be easy to learn and use, their accessibility comes at the price of your data’s consistency and accuracy. Making matters worse, errors in spreadsheets often go unnoticed. Even when noticed, mistakes can be time-consuming to eliminate because sifting through multiple spreadsheets is slow process. When you are running a business you need to know your data is precise because every small unit has a big role to play. The reality is that even a slight misrepresentation of the budget could create big consequences, like a missed chance for investment, or making an investment you can’t afford.
Accuracy is not a strong point of Excel, with studies estimating around 80-90% of spreadsheets contain errors. Organizations like the European Spreadsheet Risk Interest Group (the existence of which should be a HUGE red flag) have an entire page dedicated to telling horror stories. The EuSRIG describes one case about the Arizona Portland Cement Corporation, who was fined $350,000 and listed as a high-priority violator for “exceeding emotion allowances.” The reality of their situation, however, was that they were, and always had been in compliance with the Environmental Protection Agency. The problem was that their consultant had made an error in his spreadsheet, which they had sent to the EPA.
Such problems are why ERPs make a great alternative for your business. They are specifically designed to handle the type of work required to keep your business going. An ERP is there for you, helping you deal with the complex work that goes into your business with the added assurance that the data that goes in is directly represented in the information that comes out.
2. Wasted Time and Productivity
Take a second to think about how much time you or the employees in your company wasted on maintaining the accuracy of spreadsheets, creating new spreadsheets, updating existing pages and searching for information within. Spreadsheets are a massive time-sink for your employees, forcing them to spend time organizing, and analysing haphazardly arranged spreadsheet data, when a software designed for that task could present the information quicker and in a more user-friendly manner.
By extension, spreadsheets waste your company’s time, because departments that are forced to rely on spreadsheets for their work are going to take a longer time to complete tasks across the department. While this may seem like an insignificant problem, the effects can be rather devastating. Take for example the case of a late shipment going out from the purchasing department because of spreadsheet dependency. A problem in shipping can often have a ripple effect across the rest of your company, resulting in lower customer satisfaction, which pervades all areas of operation.
Spreadsheets lack the usability and special tools that are required of a business console. They need to be maintained and updated, and by the end, the information is so disorganized and inconvenient to work with that if often goes entirely unused, even after the hours it took to compile and build. The lack of specialized options means that even if you took the time to make the spreadsheet more intuitive by colour coordinating cells, highlighting critical data, etc., you may still have to move items around, resulting in another huge time-sink re-color coordinating the data.
An ERP may seem a little intimidating to learn, especially if you’ve been running on spreadsheets all these years, but these tools are actually pretty intuitive, presenting you with the information you need, when you need it, so that you can hit the ground running on something a lot sturdier than spreadsheets
3. Decision Making and Readability
With spreadsheets, getting a holistic view of the goings on of your company can be nearly impossible, requiring you to flip between multiple spreadsheets, from multiple departments, searching for answers to even the most basic business questions. Thus, making decisions based on your spreadsheets can feel a lot like seeing the path ahead, but having to navigate through a maze of rows and columns.
Critical data may be spread across multiple departments, where sales has their data regarding the topic, and billing might have an entirely different set of data regarding the same topic, requiring coordination in order to end with something comprehensive. That’s without even considering the very real possibility of data overlap, where sales have data for one field, and billing has entirely different data for the same field. Depending on the data that is overlapping incorrectly, the time required to discover which data set is right can be anywhere from minutes to weeks.
Making the right decisions is imperative to your business’ success, and the reality is that spreadsheets are not reliable enough to ensure that you are making the right choice for your bottom line, customers or employees. The European Spreadsheet Risks Interest Group suggests that many decision-makers place too much faith in what their spreadsheets tell them. According to Dr. Raymond R. Panko, professor of Human-Computer Interaction, despite strong indications of inaccuracies (remember that 80-90% error rate?), spreadsheet creators rarely subject their completed sheets to tests for inaccuracies. This spreadsheet overconfidence can have a significant impact on any project.
On the flip side, running your business on an ERP gives you the holistic and accurate data presentation of any decision-maker’s dreams. This view lets you see across departments, empowering you to forecast more effectively.
4. Security and Stability Concerns
Thanks to the everyday, approachable nature of Excel and similar spreadsheet programs, many managers seems to disregard the need to properly secure data. Even when password protection is used, all it accomplishes is either allowing an individual access to the spreadsheet or not. What this means is that when using spreadsheets, you are essentially locked into an everything or nothing approach, similar to a bank vault that doesn’t have any locks on the safety deposit boxes. This is far from ideal when degrees of access would be the prudent call for most business owners.
This conspicuous approach to critical data can be catastrophic because not all employees need, or should even have, access to all of your company’s data. Additionally, because of the nature of collective spreadsheet work, all it takes is an employee misplacing a written copy of the password for the credentials to end up in the wrong hands. As the US Office of War Information would tell you, “Loose Lips Sink Ships,” so don’t let poor security sink your business.
Spreadsheets additionally suffer from poor scalability, becoming increasing unstable and slow as your business expands. This increased instability can lead to crashes and data loss, thanks to the difficult nature of extracting data from a failing spreadsheet. There is no single answer to what exactly causes this instability, as it varies case by case, but the root of the problem is simply that Excel and spreadsheet programs like it were not built to handle huge amounts of data. The more data that is added to them, the more prone they become to crashes, making them a failed resource for your database out of the gate. Spreadsheets also find themselves plagued by the ever present possibility of corruption, with one user finding a spreadsheet they had been using for five or more years randomly corrupted and inaccessible.
ERPs, on the other hand, are specifically designed to contain your company’s critical data in a way that is both secure and stable. Additionally, some offer roll based access, limiting employees to the information they need to do their job, while eliminating the risk of putting them in front of your critical data. Some ERPs, including PBE3, take advantage of the power of the cloud to keep all of your data together, secured, and backed up in case of some critical failure.
5. The Woes of Sharing
Collaboration on Excel and other spreadsheet platforms is a headache. There’s no ifs, and, or buts, about it. Despite protest from many a manager to the contrary, as spreadsheets move throughout a company they shed layers, leaving behind a trail of old versions for project organizers to try to contend with. When collaborating on a spreadsheet it has to make its way from one employee to the next, often crossing departmental lines multiple times on its journey. The passing of spreadsheets in this manner can often be a time-consuming process, slowing down your business and creating countless question for project managers and decision-makers. Is this the final version of the document? Are there other copies with different edits? Who made X change here? Are there any errors? Who made said errors? The list goes on.
Making use of spreadsheets as a multiuser tool has the added problem of not being based in any best practices, with employees all having their own idea of what each spreadsheet should look like, and their own way of reading it. Markings and colours that would have made perfect sense to the spreadsheet maker may be completely confusing to a co-worker trying to collaborate on it. But don’t be mistaken, the confusion that comes from using another’s spreadsheet is more than just a speedbump for your employees, as it can lead to entirely misunderstood data, which as we explored earlier, awakens a whole new set of problems when it comes to decision making.
By contrast, ERPs are designed for collaborative work a draw from a single database to ensure that the data you are using is available to you when you need it and is guaranteed to be accurate and comprehensive.