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Spreadsheets: just say no!

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14th Jul 2011
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The use of spreadsheets for building systems to plan, budget and report have clear limitations, reports Rod Newing.

“To optimise your business performance management processes, you just need to say ‘no’ to spreadsheets, as they limit you.”

This is the message that Brian Rumbles, a director of Clear Plan, has been giving to business people when he outlines his eight best practices for better planning, budgeting and forecasting.

Clear Plan is the only dedicated European partner of Adaptive Planning, a cloud-based planning, budgeting and forecasting service.

Rumbles’ eight best practice rules are:

  1. Drive collaboration between functions. This means talking to colleagues in other departments, who may think in silo terms, so collaboration must be driven from the top.
  2. Align strategic and operational plans, including financial and compensation plans. Initial strategic guidance comes from senior management, leaving department managers to plan to meet those goals. If they achieve them, they will hit the financial plan and achieve the business strategy and people will be appropriately compensated.
  3. Create driver-based plans. Focus on the “levers and dials” that drive the business, not just the numbers, and on controllable activities that can be impacted by management. Set up model to calculate revenue and expenses by key assumptions. For example, people drive the costs of rent, telephones, laptops and hiring fees, whereas products drive material, labour and freight costs. Driver-based planning pulls managers away from focusing on immaterial detail that can be automated.
  4. Provide real-time visibility into performance. Use “dashboards”, custom screens that integrate diverse data and show the state of key performance indicators. They allow managers to react quickly to changing business conditions. For example, actual numbers from the general ledgers with forecasts and customer information from customer relationship management systems and people costs from human resource system.
  5. Evaluate cause and effect relationships. The system must allow users to drill down into underlying details, such as viewing product by customer over time, marketing costs by campaign by segment or employee cost by revenue generated this year against last year. This enables to root cause analysis, which improves their understanding of the organisation’s ability to meet its strategic goals.
  6. Deliver timely and accurate reports. They are the lifeblood of the business, so centralise the data and report from a robust reporting platform. It must be easily accessible by all department managers and contain controls to track reviews and approvals and ensure external reporting requirements are met.
  7. Use continuous rolling forecasts. Most organisations are currently forecasting the balance of the year each quarter. They would like rolling twelve monthly forecasts, but are limited by the time it takes. Rolling forecasts develop a continuous business outlook that adjusts the plan based on changing conditions. This makes the organisation more agile in identifying issues and making corrections.
  8. Perform What-If? analysis. If all drivers of the business are integrated on a single platform, in ever-changing business conditions analysts can evaluate multiple sets of assumptions, consider upside and downside scenarios, react quickly and gain insight for better decision making and improve business agility. Examples might be what if a supplier went out of business, what if demand declines, should we spend more on sales and marketing, what should we invest in or when should we ramp up recruitment?

Having highlighted the limitations of building systems for planning, budgeting and reporting using spreadsheets, Rumbles quite correctly pointed out that spreadsheets are a tremendous way of reporting information by linking cells to data stored in a proper system.

“Users can develop templates, using their familiar graphing and formatting,” he says. “They can be instantly populated with slices of the consolidated numbers.”

Not able or willing to give up on your spreadsheets yet? Then sign up for our free ExcelZone bulletin. Every month it will bring you news, tutorials and advice to make sure you're using Excel to best effect. Click the "MySubscriptions" link at the top right of this page now and select the ExcelZone option.
 

Replies (11)

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By carnmores
15th Jul 2011 12:02

marvellous

gobbledegook

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By FD4CAST FD4CAST
15th Jul 2011 14:02

Suggestion

Could you provide examples of organisations that have ditched their spreadsheets?

I would love to hear of just ONE company that has done this in their finance department and what systems they are using, because I am yet to come across any organisation that is 100% spreadsheet free.

Unless you can provide case studies of how people make the change it's always going to be an uphill battle.

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By sluglet
15th Jul 2011 14:52

Definite gobbledegook

I tried putting this article into Google translate to see if I could translate it into plain English. Unfortunately it doesn't have a gobbledegook option. Has anybody got any other options?

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By FD4CAST FD4CAST
15th Jul 2011 15:05

Alternative to Gobbledegook...

 

...Just stick to your spreadsheets!

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By JPMLondon
15th Jul 2011 15:13

Translation not needed...

 Yeah - google translate couldn't even figure out which language it was in...

However, having spoken to a linguistic expert I know, I've been told that the article doesn't even speak about ditching spreadsheets. The longwinded point seems to be that a spreadsheet in itself is not a holy grail of business management - but that you actually have to use your head as well.

Apparently, in order to plug your consultancy business properly these days you have to make simple conclusions sound incredibly clever and insightful.

Funnily enough my lingustic expert is also a spreadsheet expert and said for each paragraph of the article "hey, I could make a spreadsheet for that!"... Go figure...

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By kevin.robins
15th Jul 2011 17:29

Nonsense
I went to sleep after the 1st sentence.

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By gaharris
15th Jul 2011 18:04

Whaaaat

What is the connection between "Rumbles" comment, and the headline message??? 

The article reads like a sales pitch for a product or service he's looking to promote, but hasn't identified what that is.  Nothing in the article challenges the value of spreadsheets as used by accountants and it doesn't even begin to outline the potential risks and weaknesses that unwary spreadsheet builders and users might be exposed to.   Not much of a contribution to the debate that could be constructive.

 

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By Limnerlad
15th Jul 2011 22:29

hogwash

wow... and I thought Snakeoil was dead...!  You just have to re-invent the vocab and jargon...!  Unbelievable that such rubbish can actually APPEAR..There is no hope... sighs..

 

Rod

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Della Hudson FCA
By Della Hudson
16th Jul 2011 09:01

The rules are fine

(if I have translated them into English correctly) but I still don't see why you can't do this with a spreadsheet instead of whatever expensive software is about to be promoted.

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By FD4CAST FD4CAST
16th Jul 2011 09:54

One of the major issues...

Is that accountants do all of their mini-analyses in Excel. Then they want to build on this preliminary work, so they just create a new sheet and link the outputs accordingly.

It's just too easy and convenient NOT to do it, and everyone can understand 'how the spreadsheet works' by a few formula reviews.

Every single business is different and wants to calculate different things in different ways.

No software can be all-encompassing, hence just stick to best practice principles and techniques when using spreadsheets, such as using checksums.

For more info on using checksums in financial modelling please see my article published in AccountingWEB:-

https://www.accountingweb.co.uk/topic/technology/how-checksums-can-ease-financial-modelling-woe/445092

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
22nd Jul 2011 10:48

Mea culpa

If the article is too jargon-laden, that's my fault for letting it through without more vigourous editing to make the points clearer.

The headline, too, is a bit of spin that was added to try and attract more readers. We were perhaps not confident enough that people would click through to read "Eight things you can do to make planning and budgeting more effective". It also wouldn't have fit within the space we usually allocate for headlines.

However the article is pretty clear about where the advice comes from and what Brian Rumbles is selling - he presented his ideas at a seminar where he extolled the virtues of the online Adaptive Planning system, which is clearly identified at the beginning of the article. I sent the writer Rod Newing along to cover the event because we thought that someone with first-hand experience of novel technology systems might have something interesting to say about traditional accounting activities.

I feel that was the case, but must apologise for not doing more to render Brian's concepts into slightly more accountant-friendly terminology. Stung by your criticisms, we'll make sure that we take more care with the further articles we are planning around these common number-crunching and reporting activities.

John Stokdyk, Editor, AccountingWEB.co.uk

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