Death by Microsoft Excel : The Case for Digitalization in Finance

Written by Tinashe Mukogo

I first used Microsoft Excel for work when I had just finished high school. I had started working in professional services but owing to the crazy economic times the company did not have enough laptops to allocate to all new hires. For a year, I performed audit work manually with an A3 pad, a pencil and an eraser. The thought of making an error that would result in having to add a row to a table was terrifying. At the end of my first year, I finally got a laptop and I moved from working with pencil and paper to Microsoft Excel. The productivity gains were immense.

An additional row in a table no longer required erasing my handwriting and then awkwardly squeezing in a new row. Now all I needed was Ctr + I + R = magic! I was sold. Of late however my love affair with the use of Excel in business has faded a little, not because Excel is no longer useful - far from it, but because Excel has become an a crutch hindering digitalization especially in the finance function.

Whilst it seems business has entered the age of AI, big data, distributed - ledgers the reality is for many finance teams digitalization look like: AI = excel macro, big data = pivot table and distributed ledgers = linked excel books. Companies are moving fast at digitalization of their products but their processes especially in finance need to catch up. For example, whilst Adobe Launched Sensei (an AI tool that can automate the analysis of images, text and more), Adobe’s CFO, Mark Garrett recently shared his frustration with how much time his finance team spends crunching numbers in Excel for financial planning and analysis. Another case of manual financial processes supporting a digitalized business. Adobe is not alone. The Wall Street Journal article with the Headline “Stop Using Excel, Finance Chiefs Tell Staffs” had over 450 comments - this is a pain point for many.

Before proceeding, I need to clarify what I am referring to by Digitalization. For the purposes of this discussion I am taking Digitalization to mean - using a digital solution to perform a process that would have otherwise been performed manually. With this background I would call most of the manipulation of data that is performed in Excel a manual process.

The challenge

Digitalizing the finance function is hard. As a start - finance functions are an internal operation ,as a result, there is no “marketing value” in developing a more efficient process for financial planning & analysis. This often leads to not as much focus and investment in these areas resulting in half-hearted attempts that fail to bring solutions that sufficiently meet users needs.

Another challenge linked to the above is that, to its credit, Excel can often get the job done. The manual Excel solution may not be more efficient but it also requires no initial investment. Consider a sales report has been produced by downloading data from the accounting system and then manipulated in excel to sort sales figures by city or region. Then imagine if a digital solution could automate this revenue split directly in the accounting system so a report can be published automatically. Sound good doesn’t it? However, to set this up would require some collaboration with the programming team and a few weeks of testing the accounting system and checking to see if the output is correct. From my experience, most people in these situations default back to status quo and crank on with their excel sheets even though in the digital solution would save countless man hours in future.

Part of the reason the above occurs is the fear that the initial investment and effort required will not receive the requisite support from management and even if the digital solution were to be implemented - team members may resist change and keep on relying on Excel. As a result, the status quo is maintained and another digital solution is stillborn or sent to the digital graveyard. This explains why excel spreadsheets continue to multiply. For example, a dutch bank confidently estimated that throughout the company there were about 10,000 spreadsheets. When an analysis was performed by a specialized tool, they actually found 2.5 million spreadsheets, over 1,500 per employee!

One dutch bank confidently estimated that throughout the company it had about 10,000 spreadsheets. When an analysis was performed by a specialized tool, they actually found 2.5 million spreadsheets, over 1,500 per employee!

Countless opportunities to digitalize are missed and can often go undetected by management because at the end of the day the report is on the table for the monthly review. Perhaps the report took 50 hrs to produce when with a digital solution it could have taken only 5 hrs. However, since there is no benchmark because it has never been done before, these inefficiencies are not detected and a vicious cycle persists.

This situation is not hopeless however. I have already personally seen some great initiatives linked to digitalization in finance. Furthermore, I believe that Digital Finance Efficiency can become a big competitive advantage for a company as businesses need to become more agile. A more efficient finance department can help a company make faster decisions on a daily basis but can also help execute strategy better through faster reorganisations and restructurings as well as better integration of acquired companies.

What can Finance Teams teams do ?

1. Encourage the right use of Excel Spreadsheets

Whenever a spreadsheet gets too big or complex one needs to ask is there a digital solution to produce the same information. Excel is an amazing tool rightly used. Like an iPad, Excel should be used more for consumption of information rather than production of it. Doing the opposite is like typing out a book on an iPad rather than using a laptop. Pushing this mindset will help finance teams be more aware of when to explore digital solutions.

2. Start asking how the report is produced

When a report is before you an additional question that needs to be asked is how the information is collected and produced. When the Adobe CFO discovered how long it took produce information using excel on which jobs had been filled at the company he tried to cut excel out of the process in order to save time.

3. Collaboration of Digitalization & Finance Teams

Digitalization in finance cannot be left to a central team. In fact in large organisations the finance team would benefit from having its own digitalization team comprised of both technical experts and those in finance. Such a collaboration will help ensure that the right digital solutions are being worked on and prioritized.

4. Make use of your millennials but lead transformation from the top

People entering the workforce for the first time are from the digital generation. Not only are they willing to embrace digitalization it is was drives them. They can be powerful resources to reshape approaches considering that they have the natural flair for digitalization but also the time that comes with having less responsibility. However, ultimately the impetus must come from above and all levels of management. We all must strive for digitalization to be a success.

Summing it all up

In closing, Excel is not the problem but how it is being used. Excel should be used as a partner to Digitalization and not a hindrance. The reality is that Digitalization is coming. The only question is will you make Digitalization happen or will Digitalization happen to you.