Spreadsheets have been the mainstay of financial planning and analysis since Excel was first released more than 30 years ago.
As free tools go, they’re great. But they are undoubtedly limited. Fully functional at a single level, once multiple dimensions are required, spreadsheets struggle. They create duplication of effort, multiple versions of the truth and embed delays into planning and analysis processes. Depending on which research you listen to, it’s been suggested that up to 94% of spreadsheets contain errors – not a great baseline for supporting your FP&A activity.
None of this is breaking news, it’s been a strong topic of conversation for over a decade. The thing that’s interesting, however, is the fact that we’re still talking about it, perhaps even more now.
Inadequate systems
AFP research published last year reveals the ‘state of the spreadsheet stranglehold’.
61% of survey participants reported that inadequate systems and tools were the most pressing challenge for their organisation’s FP&A efforts.
75% of time was reportedly being spent gathering data or administering the process. This figure has not changed substantially since the last time APQC ran the survey – back in 2010.
Clearly this response indicates a low proportion of time remaining available for conducting value-added analysis.
It’s also revealing to note that 78% of businesses involved in the research characterised the maturity level of their analytics as either descriptive or diagnostic, with very few claiming predictive and prescriptive.
Change is in the air
2020 has managed to create the perfect storm for spreadsheet-reliant systems. A global phenomenon that few could have predicted has introduced a range of scenarios that threaten businesses in new ways and from multiple angles.
The Covid-19 crisis has broken traditional models. Cash flow is no longer just a vital KPI, it’s a genuine survival measure for many organisations. Drivers of business performance have changed and will continue to do so. The definition of ‘normal’ is evolving rapidly, as are consumer habits.
In this environment, businesses need FP&A more than ever. Monitoring day-to-day health has become a necessity for many and the finance function is being relied upon to provide the information required to chart a course through the short and medium term.
This just can’t be achieved with spreadsheets.
Moving forward
Examining the past to reflect on the last year only reveals how sharply the pain is being felt and why. When assessing an unprecedented situation such as we currently face, the recent past is of little use in informing plans for moving ahead. Creating a healthy future requires forecasting and flexibility that can adapt to emerging trends; predict risks and opportunities; and assess the impact of planned actions across a range of scenarios.
This can only be achieved with tools that equip your FP&A team with the agility to shift their current position – a position that hasn’t altered much since 2010 – away from administering the process and reporting on the past to taking action that provides added value. The needle needs to move from the diagnostic and descriptive end of the scale to the predictive and prescriptive end.
With IBM’s Planning Analytics on Demand, businesses of all sizes can free themselves from the spreadsheet stranglehold and equip themselves with the right tools for the task. Get in touch today to see the difference Planning Analytics could be making to your FP&A team.
Simon Bradshaw
I have worked in finance and business systems development since 2001 and am an associate member of the Chartered Institute of Management Accountants. In 2016 I became a founding member of Spitfire Analytics, a consultancy specialising in IBM Planning Analytics. We are committed to building long-term relationships across all industries. I focus on my CPD through CIMA and IBM badges, ensuring I am always abreast of best practice and developments within the industry.
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