Moving Beyond Excel – Embracing Analytics
Paying homage to Excel
Many of today’s finance and accounting leaders started their career in the 1990s and early 2000s. At the time, these leaders were starting to understand how to use Excel’s powerful capabilities to expand their processes in their departments. Ingenious tools and formulas like VLOOKUP, concatenate, pivot tables, and visual charts have been absolute game changers for finance and accounting professionals.
To this day one thing remains constant. Finance and accounting professionals love Excel. They often have many Excel sheets open at one time and they take great pride in their complex multi-tab spreadsheets. There is also a badge of honor that comes with being a department’s Excel expert.
This love affair with Excel is one of the main reasons that finance and accounting professionals struggle to move beyond Excel to embrace improved technologies. Excel holds great comfort, and professionals are used to using the amazing tool that has performed well for them. It is important for us to recognize and applaud the progress that has been made using Excel. As a finance and accounting community, we need to be open to the next frontier which will take our roles in the organization and the value we offer to the next level.
The case for change: 5 disadvantages of using Excel
John F. Kennedy said that “Change is the law of life, and those who look only to the past or present miss the future.” This is very applicable as we think about moving beyond Excel. There are many fantastic new tools that offer significant advantages to all types of organizations.
Indeed, Excel has been a great tool, and while there will always be room to use Excel for ad-hoc analysis, we need to reduce our reliance on it as a primary planning and analysis tool, as it can only take us so far.
- Lack of data integrity. Spreadsheets often have errors and issues such as circular references. It only takes one incorrect formula, incorrect link, or hard-coded cell to compromise the integrity of the data.
- An audit control risk. Most budgeting systems have a lot of supporting Excel spreadsheets that are ultimately used to calculate the facts and figures in the system. It can be a challenging quest to find these supporting spreadsheets that are often saved on a finance shared drive or worse on somebody’s desktop.
- A version control trap. Version control can be an issue as it is common that multiple people are trying to update the same spreadsheet. While Excel has come a long way in this area, users are often not up to speed on how to properly track changes and versions.
- Too much complexity. This issue is often encountered when individuals leave an organization or change roles. The individual who inherits a set of spreadsheets may not be as skilled in managing those particular Excel models or indeed they may have a different thought process entirely.
- No single data source. In Excel environments, it can be challenging to identify and find data as it may be housed on shared drives or on an individual computer. Now, there is new software that provides organizations a way to efficiently leverage historical data as a starting point for a forecast or budget.
The benefits of moving beyond Excel
One of the main goals of finance and accounting professionals is to provide business insights that will improve future business results. If finance professionals spend most of their time crunching numbers and developing Excel and PowerPoint reports, they sacrifice the time they could be spending on analyzing the business.
New software options can be programmed to complete the Excel “busy work” and free up time for finance professionals so that they can provide value added insights and advice. This is a huge step forward and requires bold thinking and vision. There are significant advantages of moving beyond Excel. These include but are not limited to:
- Forecast and budget efficiency. Many companies who leverage Excel as their main budget support tool have a very linear and time-consuming budget process. They start with predicted sales volumes and go through a methodical process of calculating the associated revenue, expenses, and ultimately EBITDA. In a rapidly changing business environment, this process often results in delivering outdated forecasts due to the time taken to complete them. Often as a result, stakeholders lose confidence in the inaccurate forecasts. New software options significantly increase automation, speed, and flexibility when budgeting, and can help build stakeholder confidence in the finance and accounting teams.
- Real-time scenario planning. Advanced software options now allow finance and accounting professionals to use tools like machine learning (ML) to develop scenarios. Can you imagine going into a business meeting with three already developed scenarios that illustrate the economy’s potential recovery post-pandemic? This would provide tremendous value to the organization, much more so than having static and cumbersome Excel models that are simply not as flexible and easy to digest.
- Move from number-crunching to value-added insights and analysis. Companies who have moved beyond Excel are now able to bypass a cumbersome analysis process and therefore focus more energy on gaining business insights. One company in the pharmaceutical industry has implemented an organization-wide system that automates the initial financial analysis and generates a graphical representation. This is a good starting point for the finance team as they can now focus their efforts on providing insights and analysis for the future.
- Improved organizational collaboration in real time. Another massive benefit of moving beyond Excel into a live system is the capability to integrate financial data and supply chain data. In an Excel environment, data sharing and collaboration is often clunky, slow, and ends up not adding any true value. New software tools allow for real-time exchange of information between the finance department and other functions. This can facilitate real-time operational scenarios and lead to better business decisions. For example, when a company experienced very high demand during Covid, a real-time data transfer could have helped the operations team decide their best approach for supplying customers.
Adobe’s CFO Mark Garrett once said he would rather have his team help him understand what the data means than spend any time importing and exporting data to and from Excel. Similarly, the CFO Journal highlighted that P.F. Chang’s Jim Bell switched from Excel to cloud-based technology to foster collaboration and cut down on administrative tasks. There are many examples of companies that have ventured beyond Excel and are now reaping the rewards.
Excel has moved finance and accounting teams light years forward over the last 20-30 years. However, the current business environment requires more flexible tools. New cloud-based software seamlessly integrates external data, automates and improves data analysis, and ultimately empowers organizations to drive better business decisions for better results. Finance and accounting professionals need to use their analytical skills to develop business cases that show management how an investment in advanced finance technology can deliver a great ROI if done thoughtfully and strategically.
The benefits of moving beyond Excel include:
- Real-time data that facilitates improved decision making.
- Improved audit control and data traceability.
- Enhanced drill down capabilities that provide insight into the business.
- Increased collaboration across the organization.
- Lower risks of problems when an employee leaves.
- Significantly improved business results.
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By Ron Monteiro