Risks with Working in Spreadsheets

Spreadsheets are an essential tool for all types of organisations and businesses rely on them heavily, particularly for financial computations. 

The most popular spreadsheet program globally is, of course, Microsoft Excel, it’s used by an estimated 750 million people worldwide but others such as Google sheets have broken through the market monopoly and provide a useful array of features which enable users to analyse and visualise data sets without the need for any technical knowledge. 

Benefits with a spreadsheets

A spreadsheet is useful to manage, present or perform analytical processing of numerical, statistical or other types of information. They can provide complex processing but are only as good as the users operating them. Just as it is easy for non-technical staff to operate spreadsheets it is also just as easy for them to overwrite or erase elements of complex formulas, tables or codes or keep it up to date with an evolving business model. As the saying goes something easy to use is just as easy to abuse and as a result, most spreadsheets contain errors. Various studies report that it could be as high as 88 percent of spreadsheets contain errors. The majority, being caused by human error and could easily be avoided. 

Risks with spreadsheets

Spreadsheets plus human error may only be a minor hiccup for small businesses, but in larger companies or those listed these errors can have a much greater financial and professional impact; in some cases, this misreporting can be devastating for the share price.  

According to The Times, many large public companies have been damaged with share prices tanking after reporting what is most often explained as “arithmetic errors” in published accounts. But such mistakes are not only constrained to business, almost all organisations use spreadsheets, from the military to the NHS. Errors in spreadsheets have led to doubts on rationales for global fiscal policy, as indicated by the case of an error in a Harvard economics study. By failing to include certain spreadsheet cells in its calculations, the study by Harvard economists Carmen Reinhart and Kenneth Rogoff may have overstated the impact that debt burdens have on a nation’s economic growth.

Manual work = risks 

Like most programs, using spreadsheet software is a manual process. This means calculations are susceptible to human error. The most common is keying the wrong numbers, deleting formulas, not linking new fields or a failure to update formulas. Formulas are unique and have specific tasks, as there is no automated process to check for worksheet errors, checking these files is an onerous but important task to prevent errors from happening. Regular auditing and checking of spreadsheets will prevent the need to rebuild the work from scratch.

Spreadsheets have been used as a key business tool for over 40 years and despite better and more suitable software being available spreadsheets are not going anywhere. Businesses will continue to keep working with them so Mercur has produced a complimentary eBook which sets out six critical risks of reporting in spreadsheets and how to mitigate them.

 

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