Widely recognised as a major business risk, spreadsheet failure causes almost one in five large businesses to suffer financial losses and was a major factor in the high profile collapse of US energy giant Enron, with legal documents revealing that 24 per cent of the corporation’s spreadsheet formulas contained errors.
Spreadsheets are still used extensively in the preparation of British company accounts and as many as 20 per cent of group companies rely on them for the monthly consolidation and production of management accounts.
The lack of a system for checking or tracking who has made changes and when the changes were made increases the level of risk and accounts for over half of all errors, according to a recent study into their use. The scene is set for regulators and auditors to take increased interest in their use over the next two years and it is important to find ways to improve their data quality and validity.
Alternatives to the humble spreadsheet can have their downsides. Enterprise software solutions can prove costly and around a third of these implementations fail because the finance team is forced to change business as usual processes to adapt to the new systems.
Connect to the Cloud
One new option is to connect spreadsheets to the cloud and automate consolidation, financial reporting and forecasting. Already, a leading UK bank and global Swedish retailer, amongst others, are using the Cloud CFO solution, which leverages the power of an industrial database and combines it with the simplicity of a spreadsheet interface.
The beauty of the database is that it is possible to keep a complete track of every change made to every spreadsheet cell by every user at every point in time since document inception. This is invaluable for forensic audit and for industrial grade security.
At first glance, Cloud CFO looks exactly like working with a set of normal spreadsheets. There are no changes in business processes and no additional training is required. The difference lies in the fact that every spreadsheet is enhanced by a connection to a secure Cloud server so that as each member of the finance team changes data in their local spreadsheet, updates are synchronised in the Cloud and a single version of the truth is always presented in real time. Businesses benefit from an evolution of their current system and no longer having to work with constantly out of date data, associated collaboration and versioning issues.
High street bank cuts FCA and MI reporting time from 15 days to five days
Serious financial and time critical pressures from the FCA forced one high street bank to find a way to streamline their spreadsheet practices without losing time or having to retrain the members of the team. The scale of the challenge was daunting as one shared spreadsheet held 80,000 active cases of customers under review and 250 advisors were forced to read and write to it concurrently. Because of the severe performance and system outage problems, the bank was faced with finding a solution that was innovative and that would not take months to implement.
Cloud CFO was installed and instead of every adviser manipulating 80,000 records they were able to handle just their own handful of cases, reducing the network traffic by a factor of x10 to x100.
This new infrastructure has enabled the programme to meet its commitment to the FCA and reduce the time taken to produce FCA and Executive MI Reporting from 15 days to five days and significantly reduce risk of incorrect data in reports. There are in the region of 1,000 users now.
How Cloud CFO resolves spreadsheet risk
- Reduces the reporting effort with the automation of any ad hoc reporting process ensuring data integrity and 100 per cent accuracy
- Existing spreadsheets and other disparate data sources (such as MS Access and core ERP) are integrated and reconciled into one solution
- In-built audit trail satisfies regulators that controls are in place
- Rules can be in-built to control the data being entered
- There is no large scale data migration and therefore minimal disruption to daily business operations
- The multi-user functionality ensures that all authorised users can access and update the same data concurrently avoiding issues with versioning, copy/paste difficulties and data integrity
- Reporting uniformity is achieved by defining bespoke reporting formats and mapping individual components arriving at a single version of the truth across the group
Cloud CFO handles all types of reporting as well as the standard management accounts results consolidated by statutory entity with analysis of performance against budget and prior year. Additional reporting includes other management information such as KPIs, accounts in statutory format for HMRC and Companies House submission and other ad hoc reporting for third party stakeholders such as bank covenant reporting.
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