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How to avoid common spreadsheet traps

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19th Aug 2015
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As we have often seen on AccountingWEB one small spreadsheet error can cost a company millions. So how can you avoid this happening?

A new whitepaper from Aqilla notes the recent case of a financial services company that overstated its earnings by$2.6bn due to a missing minus sign.

In 2012, clothing retailer Superdry suffered a similar, but somewhat smaller loss when arithmetic errors in a forecasting model to a £2.5m shortfall in its wholesale business. This simple human oversight was a plus sign was inserted rather than a minus sign into the company accounts.

Presenting its take on the 10 ways to make most effective use of Excel, Aqilla sets out to help companies avoid that kind of financial pain.

So what are some of the things you can do to avoid falling for the potentially catastrophic errors?

The paper recommends a collaborative approach to spreadsheet development and use to reduce the reliance on a single individual. Using free, collaborative tools such as Google Spreadsheets or Microsoft Office 365, that lets users edit the same document simultaneously - and auto saves the result - lessens the chance for human error.

When it comes to Excel, remember to keep it simple. For example, don’t over complicate things by using macros. Macros rely on the knowledge of an individual to maintain, which exposes the business to operational risk should that person leave. If this happens, the financial models would have to be recreated from scratch, the guide warns.

Spreadsheets should be used as extensions to your finance system, rather than being fundamental to them. If you are looking for solid transactional accounting and analysis, focus on your accounting system. For more dynamic analysis, the spreadsheet will give you a more agile approach to data presentation and visualisation. Whichever tools you choose for each role, make sure they can comfortably work alongside each other.

The next time that you get the urge to click on the Excel icon, remember that its flexibility can be a problem. Finding a way to apply your favourite financial software within safe boundaries is one of the most useful things you can do to avoid the kind of spreadsheet blunders that end up in the ExcelZone hall of shame.

Download the 10 effective ways to make the most out of Excel whitepaper for more information on how you can avoid the pitfalls of inefficient Excel use.

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By chatman
21st Aug 2015 15:51

How to avoid common spreadsheet traps

Does this article tell you how to avoid common spreadsheet traps? I couldn't see anything.

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By James Power
21st Aug 2015 17:00

Checksums
Not much practical advice in the article above. You are better off building checks into every workbook you build:

http://m.accountingweb.co.uk/article/how-add-basic-checksums-structure/5...

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