Five Critical Challenges of Spreadsheets that Hinder Finance Digital Transformation

Our previous blog discussed why organizations need Excel/Spreadsheets to solve the issues or challenges that aren’t addressed by the standard “Big Iron” systems like ERP, CRM, EPMS, etc. While spreadsheets are the “glue” for application gaps in Finance, they also create challenges as we digitally transform finance.

This blog will explore some of the major deficiencies in spreadsheets that create obstacles to digital transformation in finance.

Unstructured information storage: One of the core pillars of Digital Transformation is digitalization of information. This is one of the first challenges created by spreadsheets. Information contained in the spreadsheets is unstructured. Spreadsheets typically have high-level planning and ad hoc analysis that would be invaluable if stored in a manner to be easily referenced and retrieved. Some organizations put employee names, version numbers, or dates into spreadsheet names to address this, but these hacks and workarounds aren't sustainable in organizations of any size.

Organizations relying on disconnected spreadsheets as their main tool for analysis will have to create an organized way of capturing, organizing, and processing valuable information. They will have to figure out how to give the information context in terms of dimensions, members, dates, accounts, values, and models. This is only possible when spreadsheets are connected to databases.

Unavailability of real-time information: Companies need an effortless way to access real-time data without the overhead and delays of system administrators getting involved or the latency from batch data extracts. Real-time information is necessary for a quick “big picture” outlook and agility when making fact-based decisions. Processes driven on spreadsheets can never meet the “real-time” expectation due to their inherent reliance on the manual ‘collate, process and consolidate’ approach.

Lack of streamlined process: In our previous blog, we described Excel as the glue connecting multiple legacy applications together. By doing this, spreadsheets create a challenge to the digital transformation of finance and violate the second pillar of Digital Transformation, streamlined processes.

Spreadsheets do not streamline processes; they complicate them. They are not part of a workflow or collaborative system and do not have version control and change management practices. Most of the time, spreadsheets are shared or emailed and have multiple versions on shared drives or private drives with little documentation on the assumptions for changes in different versions. File-based cloud solutions provide better “band-aids” for the lack of workflow and structure but still don’t provide the controls, collaboration, and repeatable enterprise structure, which organizations need for reliable and error-free financial processes.

Security issues and sensitive data risks: Spreadsheets do not provide the necessary security required for today's business environments. While Excel was never designed as a multi-user tool, multiple users can share and use spreadsheets, but data security is an “all or none” proposition. Either you have access to the spreadsheet and the data stored in the spreadsheet, or you don’t. The ‘perceived security features are basic file/ workbook level security. Spreadsheets were never designed to store sensitive data and collaboration. The challenge is that spreadsheets work best and are most secure when there is only one user. All it takes is a smart, motivated person and some internet searching to thwart most spreadsheet protections.

The fifth challenge is really a grouping of challenges of spreadsheets that have a more indirect impact on the digital transformation of finance. These include cumbersome audit processes and a lack of standardized versions. The limitless freedom and flexibility of spreadsheets also mean that creating their own spreadsheet is easier for many users than understanding one created by someone else. Digital Transformation is the competitive imperative of our time, and it’s too strategic and all-encompassing to be done without Finance playing a strong role. Finance teams that contain spreadsheet chaos and systematize their processes and expertise will find themselves at the heart of their organization’s transformation.

In the next blog, we will explore how to mitigate these spreadsheet challenges.