Spreadsheets – must-have tool or lethal weapon?


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