With an estimated 800 million users, Excel is one of the most used applications worldwide. In effect it is the #1 platform for analyzing data, finding information, preparing charts and presenting them to stakeholders.
WHY DO PEOPLE LIKE AND USE THIS TOOL SO MUCH?
You can get what you need quickly and without starting expensive IT projects.
Many users prefer to see their data in a particular way. Legacy systems have standard reporting layouts that lack the personal touch or the corporate identity that you want to bring across. Having these ever-changing demands embedded in standard software would imply involving IT vendors or departments which results in lead times of weeks or months, not to mention the costs that are involved.
Excel is extremely flexible.
The possibilities to create your layout, using of colors and fonts are endless and so is the scale of functions and formula’s.
User-friendly and low entrance for new users
Even if you would have never used Excel before, within a few minutes you are able to produce a simple overview with some data that looks professional. Moving columns or cells around does not require complex coding or programming skills.
Most organizations have Office licenses including Excel.
As there are so many companies using Excel, sharing information with external parties is even easier and compatible than phone chargers.
WHAT ARE THE PITFALLS?
As Excel is great for analyzing data and gives you complete flexibility to personalize, that is immediately what makes it weak. Even though you can, it does not mean you should use Excel as an accounting system. Also, if you need to capture huge amounts of clean normalized data, then better use a database (warehouse) system. Excel was never intended for that.
Financial reporting and forecasting are performed with Excel models in many organizations for good reasons however it will very often always face issues like:
- What is the latest version?
- Is the data source correct?
- Is the data consistent with previous month?
- Errors due to accidentally overwriting a cell.
We will soon do a blog post on most common mistakes and best practices in Excel modelling.
For all reasons above Excel is also very often used for reporting and forecasting financial data. In many departments of organizations of all sizes people maintain spreadsheets in production mode to present information on which important decisions are made.
Often, these Excel models are designed by a single person without being properly documented, making these spreadsheets very vulnerable and even worse: making the organization vulnerable and dependent on this one person.
Next to using Excel, there are many systems on the market that enable automated forecasts, often directly interfaced with ERP systems or accounting software.
These applications have a huge advantage when it comes to data integrity, scalability and stability and do not have the disadvantages as described above. It is professional software, well documented and receives timely updates and bug fixes.
The disadvantages of these systems are reciprocal to those of using Excel spreadsheet. Changing the layout of a report can be quite a job and changing the base parameters of your business planning or adding a new division might have to let you go back to the drawing board.
THE ANSWER ON FORECASTING
If we look at the pro’s and cons of the various tools that are available a combination of Excel and BI, backed by solid clean data is the ultimate solution for flexible AND reliable forecasting.
In our vision, actual data from accounting systems should be the basis for forecasting but should already be structured to allow the planning function to work with this data without the need for copy, paste and translation.
Preferably the data should be interfaced, and Excel should only be used to perform quick analysis, make calculations and scenarios. That is what it was designed for and that is where it has a superb advantage to any other application.
For deep analysis and reporting to stakeholders there are quite some great BI products out there that do a great job in visualizing and presenting your output based on a stable set of data from both your ERP / accounting systems as well as your forecast calculation made in Excel.
Reporting to management should not (any longer) be done by sharing Excel sheets.
Management should focus on decision making by receiving clear ready-to go information and not spend their time on digging into enormous spreadsheets by themselves.