The Problem

Spreadsheets are an indispensible component of sound business planning, providing a core foundation that enables confident financial growth and development. At least, they should be.

All too often, what begins as a simple tool quickly loses shape and coherence. Companies invest heavily in consultants who model business decisions and transactions on their behalf, and yet they are frequently left with spreadsheets that are at best inefficient and at worst damaging.

Not only will inefficient spreadsheets increase the risk of costly mistakes - for example, costs incurred by making inaccurate business forecasts – they will hamper the smooth operation of any organisation irrespective of sector or size.

Why does this happen?

Problem spreadsheets can be traced back to a number of causes.

1. Software ubiquity: familiarity with software does not necessarily mean having the skills to construct a robust model.

With Excel on every desktop, on the surface it would seem like anyone can build a spreadsheet. And yet, just because someone knows how to use Word, we don’t automatically assume they are a good writer. The general recognition that the ability to write well belongs to a separate skill set than computer literacy should also apply to spreadsheet modelling.

2. Domain knowledge vs. modelling expertise: spreadsheets can be a time-consuming task for someone whose talents lie elsewhere.

The task of developing the spreadsheet often goes to the person with the most relevant domain knowledge. They are familiar with Excel, they know what the conceptual problem is, it seems logical to let them get on with it.

However this is a poor use of human resources and expertise. Assigning a trained modeller to build the framework will allow senior management and company directors to concentrate on the tasks only they are in a position to fulfil.

3. Weak productivity: effective spreadsheets require collaboration and clear instructions for multiple users.

Spreadsheets are designed to fulfil particular needs. Often the people who build them have no guidelines on how to organise or format them, which slows down the process of construction as well as the on-going maintenance and use. Learning to understand an inefficient spreadsheet created by someone else takes time and runs the risk of reducing company productivity.

These problems arise when companies assume that anyone can programme a well-structured and sensible spreadsheet. However, effective modelling requires training and experience. The most productive spreadsheet development process is that which uses a consistent approach and leaves the detailed coding to a spreadsheet engineer. We call it collaborative modelling.

Fortunately, while spreadsheet problems have a number of causes, there are also several effective solutions.