Spreadsheets have been around for 30 years now (they first came out in 1985),
but everyone thinks they have always existed. They form an essential part of a
proper finance person's toolkit. They are the treasurer's Swiss army knife,
adjustable spanner and magic problem solver. Millennials, or generation “Y”,
cannot imagine how previous generations coped before they existed – in the time
when you lined up columns, rows, numbers and figures on paper, and did various
calculations and consolidations by hand alone. Spreadsheets are to finance what
printing was to culture – indisputably a revolution. The world of finance would
never be the same again. But we ought to ask ourselves whether a tool or
application might sometimes give rise to more problems than solutions. Probably
not, because nobody could cast doubt on the usefulness of these extraordinarily
flexible spreadsheets. Excel fanatics will tell you that they can be made to do
anything. However, we should also acknowledge their flaws and lack of
robustness which led to the emergence of more specific types of technology, such
as TMS (i.e. Treasury Management System). The old saw "to err is human, to foul
things up properly you need a spreadsheet" probably exaggerates matters a bit.
Calling spreadsheets the Voldemort of finance is equally idiotic. Spreadsheets
have plenty of detractors, however, who think they are too dangerous because
they are too flexible. They think flexibility goes hand-in-hand with the risk of
error. It is nevertheless true that we must never forget their weaknesses and
limitations. It is by forgetting their weaknesses that users, through
overconfidence in their figures and findings, are misled into making mistakes that
can sometimes be catastrophic. A recent bank scandal involved a mad trader who
shall remain nameless and used, on top of dangerous trading activities,
spreadsheets that contained a number of errors in revaluations. Anything that can
be falsified, distorted or changed, even unintentionally and in good faith, must be
handled with the greatest care taking endless precautions. Perhaps that is why
some people say that everyone knows spreadsheets to be the world's most
dangerous software applications. They are like a knife with many blades. They can
be a very powerful tool; but also a terrible weapon. The crucial thing is to put
them to their proper use. There are rules to be followed and coordinated to limit
risk. Unfortunately, everyone uses them in their own uncoordinated way, adding
to the potential chaos. The risk is in error, an error that gives rise to further
errors, which are then compounded. Error can be leveraged phenomenally and
can have a domino effect.
It takes me back to the time when I discovered my first Texas Instruments pocket
calculator and my first HP17b, which were then followed by VisiCalc, by XEROS
applications, then by Lotus 1-2-3 and Microsoft's XL. The fact that they are still so
widely used proves that software applications such as ERP’s or other TMS systems
have limitations and do not do it all. It also proves that users need additional
resources and ingenuity to do their work, and that the specialist software
applications do not give them enough flexibility. The popularity of a tool is
evidence of the need for it and of its usefulness, but certainly not of the inherent
risks that go with it. The experts think that the vast majority of spreadsheets
contain errors. It sends a shiver down your spine. Spreadsheets allow you to do
any calculation you like with unparalleled power, without identifying the potential
errors. That is where the problem lies. A spreadsheet is not a database. The
danger lies in forgetting this and populating other software applications with
results from it. Even the best TMS applications allow export to XL for the figures
to be processed and, even worse, for the results to be reimported. You do that at
your own risks and perils, my dear treasurer colleagues! Never forget that using
our magic knife, if we do not handle it properly, can lead to cuts or worse.
Having a spreadsheet containing errors is not the worst thing of all, instead the
worst thing is not even asking yourself questions and just accepting the results as
gospel. The problem lies in mistakenly thinking you are right when in fact you are
way off the mark. Businesses are often over-reliant on spreadsheets and many
processes rely on spreadsheets with all the risks that this brings with it. Surely
there must be other alternatives or solutions? Spreadsheets are a bit like a
drawing board that allows you to lay out and design a prototype, a sort of
business blueprint. The financial Plasticine or modelling clay that you use for
designing a report. If used properly, it is immensely powerful and allows you to
plan out what you want the specialist software application to do.
But it can only do so much. There is nothing wrong with spreadsheets if you make
sure you do not become overly reliant on them. Spreadsheet use is like alcohol: it
needs to be consumed in moderation or with great care and within certain limits.
You can have too much of a good thing.
There are many software solutions around that can do the same as XL but more
robustly and in a more structured manner. The question is: do we prefer the easy
way with XL or the more structured way with a dedicated tool? There are also
aggregators of data. This is crucial for consolidating figures coming from different
sources and for calculating KPI’s and other performance and business indicators.
Spreadsheets, when properly used, just as with sheets of paper for designers and
artists, can be and still are a wonderful tool. Using them intensively brings to light
their limitations and the risks arising from them. That is the other side of the coin.
We need to use our knives for fine carving, and not for cutting ourselves. The
paradox is that the more we develop standard dedicated solutions for resolving
problems or meeting needs, the more we use spreadsheets. It has been
demonstrated that the sophistication of IT resources and their growing number
goes hand-in-hand with greater use of spreadsheets. Weird, isn't it?
The important thing is to automate the interfaces and reliably to consolidate the
data that is available to us from multiple sources. The greatest challenge in
treasury is to manage our big treasury data as well as possible, and to extract its
very essence. This is a technical challenge that few treasurers seem to have
identified or at least acknowledged. However, it is by ensuring that our output is
reliable that we are able to generate the relevant analyses that should flow from
it, and take the right decisions or make suitable recommendations to the CFO.
What we should be trying to do is to free up time and generate confidence in the
quality of our output, to enable us to devote resources to analysis and strategy
and so to generate value. The time allocated to creating value in finance is usually
too short compared to the time allocated to repetitive tasks and to producing
reports or to doing compliance work. Generating value for the business is the only
thing that really matters, but it is all too often overlooked.
François Masquelier, Chairman ATEL
June 2017