When Should You Move Beyond Excel? 6 Signs that You Might be Ready

Late last year, the Wall Street Journal published two articles that shocked the Finance community.  "Stop Using Excel, Finance Chiefs Tell Staffs", and its follow-up "Finance Pros Say You’ll Have to Pry Excel Out of Their Cold, Dead Hands" stirred up the internet quite remarkably.

We’re not here to tell you that Excel is dead, or that you should abandon its comfortable environment any more than you would go back to columnar paper (for those of you who still remember what that is).  Excel is a core tool for analysis and can't be discarded, any more than you could convince most writers to abandon their word processing software and revert to manual typewriters.

excel word cloud.png

Excel is a fantastic productivity tool, but organizations get into trouble when it becomes a ‘live’ financial system.  Finance professionals often show us, with pride, the multi-tab mega-spreadsheet they developed over a weekend to solve a problem, and that has become the core tool to produce their monthly reporting and analysis.  It's only when they leave the company, or someone else takes it over, that the inadvertent errors buried in the spreadsheet come to light or the virtual impossibility of maintaining the spreadsheet becomes apparent.  These aren't careless errors; rather they are changes that get introduced over time: a plugged number here or there, a named range that doesn't get updated, a formula error in copying … but they lead to significant error potential, particularly in the absence of solid analytical review.

When is it time to look Beyond Excel? 

Here are 6 signs that your model might be ready for a different platform:

1.     Need for Dynamic Data Update - We all want the latest data, the gold-standard "one source of truth".  With an ever-increasing volume of available data, constantly refreshing, the need for almost-real-time data continues to evolve.  Beyond sourcing raw data, decision-making requires constant sharing of current, accurate data.  The Excel-based process of query-import-process-save-share cannot respond in this high-frequency environment.  When you need to source and share data constantly, you need to look Beyond Excel.

2.     Size and Complexity - In Excel, every cell is one of data, a label, or a formula.  When you consider the size of a large model - rows, columns, and tabs - the number of formulas required explodes, and with it the potential for error.  While models may start off correct, adding rows or columns for new products, offices, staff, etc. requires that formulas and references are copied, inserted, or updated.  There is little ability for the user to readily test the accuracy of a model at scale.  When you spend too much time scrolling around your spreadsheet and double-checking results, it's time to look Beyond Excel.

3.     Dimensionality - Excel doesn't do multi-dimensionality very well.  That's why Pivot Tables came into being - to add a visual slice-and-dice view to computed results from a results table.  But building those results often requires nested sections and tabs, with the same formula repeated, over and over, for each product, office, customer, staff level, etc.  Other dimensions are also present in most Finance models - Time and Versions (such as Actual, Budget and multiple Forecasts).  When your model contemplates more than 2 or 3 dimensions, or requires multiple elements within dimensions such as a 5-year forecast with 3 versions, think Beyond Excel.

4.     Collaboration and Integration - Excel was born for the Personal Computer.  In the old PC days, output spreadsheets were first shared on floppy drives, then USB sticks and network drives.   Person A would share their spreadsheet with Person B, who would then use it for further analysis, integrate it with another calculation (e.g., sales forecasting impacting on procurement planning), put it into a report, or share it with Person C.  There is no process to automatically force an update to the downstream models when the original data changes, or if an error is detected.  And no one could make a change to the spreadsheet if a downstream user depended on a specific format.  This structure is out of sync with our current needs to share data for decision-making across the enterprise.  Integration moves us Beyond Excel.

5.     Process Automation and Workflow - Guiding users in entering and approving data is a task that macros can be used to support.  Spreadsheets are increasingly dynamic and being used to manage processes - such as budget development and approval, data collection and forecast building.  But these tools were not designed to advise a manager to approve or reject a new hire request or budget change.   The fragility of spreadsheets sometimes leads these models to break down under update and usage.  If you need a system that can guide and track users in executing transactions, you need to work Beyond Excel.

6.     Risk and Control - Spreadsheets are used by organizations to support decisions - either providing the data upon which decisions are made, or actually providing data into transactional systems.  The risks embedded in these spreadsheets can be substantial, as we see each year when another large spreadsheet error hits the news.  Spreadsheets themselves are not well suited to audit control - access and changes are not tracked, protection algorithms are easily broken (don't believe me?  Just google it), and manual inputs are hard to detect.  When you can't afford spreadsheet errors - find controls Beyond Excel.

Two caveats:

  • All of these items CAN be handled by Excel.  The issue is that the effort to integrate true systems capabilities into Excel may not be worth the cost.  Just because we can doesn't mean we should.
  • One size doesn’t fit all.  Many spreadsheets should still be in Excel.  The trick is seeing which ones shouldn’t.  The guidelines above should help sort that out.

Getting Started

There certainly are alternatives to Excel, affordable for almost all sizes of organizations.  We grew up in Excel, and feel your pain. 

We want to help.  Find out how other Finance professionals are moving Beyond Excel.  We encourage you to Take the BetterVu Challenge.  Give us an hour of your time.  Show us your spreadsheet, and we'll show you a better way.