How Close Are You to a Spreadsheet Disaster?

Author: Malcolm Brock

Monday morning (9 April 2018), reading The Times newspaper Business Section I was struck by the headline ‘Spreadsheets plus human error can add up to disaster’. As a subject I have long espoused on, often at great length, I had to read on…

The Financial Editor of The Times, Patrick Hosking, was writing about the sudden collapse of Conviviality Plc (CVR.L) the owner of Bargain Booze and Wine rack, among others, that appears to have lost £500m in three weeks, making its shares close to worthless. He explained that actually much of what has happened remains unexplained, but he does offer one insight:

“…one of the few admissions that did come out of the company was that an “arithmetic error” led to it inadvertently exaggerating expected profits from its wholesale division by £5 million a year in January. This was caused by someone entering a line into a spreadsheet program months ago when they shouldn’t have, according to one source close to the company. Not for the first time, human error with spreadsheets has led to disaster.”

We have all spotted errors in the spreadsheets we use, and I would suggest just as often missed them, but have we ever really considered the consequences of those missed when we use spreadsheets as a corporate reporting or planning tool? Well, here is a pretty dramatic example! Patrick listed a series of ‘blunders’ that had a huge impact on business at the end of the article and featured an error made by UK retailer Marks and Spencer (M&S): 

 "In July 2016 M&S inflated Sales growth (1.3% growth should have been 0.4% decline) due to a ‘clerical error’ in a spreadsheet, months before, and had to retract its reported quarterly numbers just a few hours after it released them to the stock market.”

If you have a Times subscription and missed the article you can find it by searching ‘spreadsheets’ on the website. It makes interesting reading!

How do organisations avoid an impending disaster? Stop using spreadsheets? It’s unlikely this will happen. But, I do suggest that organisations stop using spreadsheet for tasks and processes that require a robust and secure business system. What do I mean?

  • Planning, Budgeting and Forecasting – sharing, updating and changing uncontrolled spreadsheets is an unnecessary manual, slow, insecure and risky situation when there are so many great solutions available for these applications. With many solutions available ‘in the cloud’ they are not difficult to implement or expensive so the barriers to acquisition are not high.
  • Financial Consolidation, Reporting and Analysis – again re-keying data from corporate systems into spreadsheets creates unnecessary risk. There are solutions that take data directly from these systems and provide interactive reporting and analysis with security and ready-made key reports like P&L, Balance Sheet and Cash Flow Forecasts. Again, many of these are Cloud solutions.

So, my final question is why risk your own disaster? The solutions are not expensive or difficult to implement. We have worked with organisations from many sectors, both large and small, to remove their risk. If you want to know more, please reach out to me on LinkedIn or visit our website www.brovanture.com.