I have been involved in Performance Management since about 2001 and it amazes me that still today many organisations continue to rely so much on spreadsheets to do their planning and forecasting, profitability analysis, and even to record and report their financial and operational results publicly to Companies House, stock exchanges and regulators alike. Most if not all of these processes involve blending the output of those spreadsheets with narrative and context written in Microsoft Word, the content of which has a number of contributors from across the organisation and not just the finance function or the office of the CEO. Then factor in the number of revisions to both excel and word documents, ensuring that the right versions are paired together for the final release and that the numbers picked up in that spreadsheet include that wayward journal adjustment that was just posted due to it being missed in the close – is it any wonder then that we are still seeing horror stories such as results reported early, or in the case of the country Spain, 4 days after announcing the level of public debt, they had to re-issue the statement due to a number transposition equating to a €10Billion difference.
However, I remain optimistic, as many companies and public bodies can now be seen embracing the tools and processes of Enterprise Performance Management (EPM) and Governance, Risk and Compliance (GRC), that this is in fact a war we are winning and the risks associated with getting these things wrong are being seen as real and not just software company marketing messages (in the case of Google making a premature announcement it caused there shares to drop 2.5%).
But whilst there are some major horror stories out there in the public domain such as those that can be found here the true costs to the business can be traced back to the beginning of any process that is reliant on the emailing or submitting of spreadsheets. Let me ask you to think about how many times you have ever heard the question “Why are my numbers different from yours?” and with all the technology and systems we have available now, why is this still a common start point for review meetings in many organisations? Many of the causes can be traced back to the inappropriate use of spreadsheets. Whilst great for some things, they were conceived as a personal productivity tool and never as collaborative, process controlled, enterprise-wide consolidation and reporting or budgeting and planning systems. However due to the spreadsheets own success, attributable to its ease of use, our reliance on them as grown with their pervasiveness.
Let´s take an example, it is relatively easy to whip up a customer or product profitability spreadsheet, for example, in an hour or two. You just need to collect the sales and expense numbers, apply some indirect costs (possibly sourcing the percentages of these from a previous spreadsheet report) and there you go, you have a profitability report. The problems though start after the report starts to be shared and colleagues start to compare actuals to forecast, or include projections based on historical trend data. Then, of course, there are the finance team members, they get to see the report and start to have palpitations, the indirect cost assumptions from that old report are wildly inaccurate to the current actuals due to the fact that exchange rates on foreign expenses is based on rates way out of date or that or that finance have implemented new revenue recognition or sales commission split policies, or, or or… The list can be endless – but still let´s just hope you never made any business decisions based on that spreadsheet which are going to cost the company money!
How then do we overcome the problem of the spreadsheet then? Well, for the observant of you, you may have noticed that I was careful enough to talk about the “inappropriate use of the spreadsheet”. If I were to try and convince you in to removing excel from your organisation you would think I was mad and I am not going to take my chair into the world of the financial process and try to hold back the waves of spreadsheets, instead I am going to suggest that we in fact look to harness the power of the spreadsheet by tethering the content to central repository of data to ensure everybody is working from the same base data. The SAP EPM Add-In for Office which is a constituent part of SAP’s Enterprise Performance Management suite of solutions is a pretty sophisticated way of managing that challenge, enabling not only access from Microsoft Excel but also allowing data to be consumed and reported in both Microsoft Word and Powerpoint as well. This allows us to provide a centralised single source of data being accessed in a secure database driven way in either an input/reporting manner for Excel or reporting only manner for MSWord and PowerPoint.
And finally because the EPM add-in is pervasive across the suite of EPM tools that profitability report we talked about earlier could have been created from data held in SAP Profitability and Cost Management (SAP PCM) which is a much more accurate and disciplined way to determine customer profitability (just think of all the complex allocations that need to be applied) – unlike the spreadsheet example mentioned previously. Instead of the finance person making up formulas, allocations, and deciding what is included in that customer number or not, SAP PCM can apply those allocations and assumptions in a centrally driven, rule based environment for you. So now you CAN spend more time in your meetings deciding what do to with that customer: pay more attention, adjust prices, offer new services or plan to move the client to a different sales channel, whatever the plan it can then be submitted back to SAP Business Planning & Consolidation using the same EPM Add-In for Excel – and much less time arguing about why the numbers differ.
Any questions left? Then don´t hesitate to contact me via comment.