Treasury Today Country Profiles in association with Citi

Use of spreadsheets in corporate treasury

This issue’s question

“Can corporate treasury live without Excel spreadsheets?”

Portrait of Cale Bennett, Cofounder, Arkava
Cale Bennett
Cale Bennett, Former Group Treasurer of Tatts Group, Cofounder, Arkava:

At the heart of every treasury operation sits a file system stuffed with spreadsheets, most likely created in Microsoft Excel. A category killer that is equally powerful and versatile, Excel is the go-to application in treasuries for everything from complex financial modelling to issuing payment notices. Yet, despite their benefits, spreadsheet errors have been implicated in several significant financial failings.

Fundamentally, Excel’s strengths ensure its weakness. Versatility and power together can be unwieldy and as the complexity increases the probability of being error free falls. Highly skilled practitioners only have one significant spreadsheeting advantage over newcomers: they know there are errors in their spreadsheets.

The reality, however, is that many treasury professionals are highly skilled spreadsheeting practitioners. Very few problems are unable to be solved within the confines of those cells and therefore when presented with a problem, firing up Excel is the first thing any treasurer thinks of.

Numerous online applications are springing up to replace Excel and spreadsheets in general, with cloud-based alternatives attacking everything from financial modelling to time tracking and everything in between. Investors are clearly believers in the new offerings with one alternative, Smartsheet.com, having raised over US$100m alone.

However, these applications are only replacing parts of what Excel can do. Admittedly, some are likely better than Excel at their niche (which Excel was probably not intended for anyway). That said, it is impractical to split Excel into its use cases and begin using individual applications as substitutes – particularly for power users such as those typically found in treasuries.

If it is impractical to remove Excel from treasuries globally, what does the future of Excel look like? There are two possible trends that could be anticipated to play a larger role in the next evolution of Excel. They can be summarised as internal and external extensibility – fundamentally extending the functionality of Excel to better account for the use cases being implemented in the up and coming cloud-based Excel substitutes.

Internal extensibility includes third-party add-ins that improve the functionality of Excel. These extensions could be used for improving governance or increasing productivity. Add-ins like Modano, which increases productivity and governance when creating financial models in Excel, is an excellent example of an internal extension of Excel. Modano restricts some of the versatility of Excel but rewards the user with increased productivity and reduced ability for structural errors within their models.

External extensibility fundamentally involves enabling Excel to interact with the internet. As more and more systems move to be cloud-based and the application programming interface (API) ecosystem expands, the ability of systems to talk to each other improves. Whilst dealing with API’s via Visual Basic for Applications (VBA) is quite difficult, the integration of languages that more naturally do so, such as Python, is likely to increase. This will enable Excel to sit in the middle of many systems, dragging in and manipulating data in a way that treasury people love so much.

In conclusion, despite the well-known failings of spreadsheets and the challenge of new systems to the dominance of Excel, it appears very unlikely that treasuries will relinquish their use of spreadsheets.

Portrait of Andrew Marshall, Managing Partner, Covarius
Andrew Marshall
Andrew Marshall, Managing Partner, Covarius:

One-word answer: no.

My reasons do not focus on the wonderful yoga-like flexibility of the spreadsheet and the other many reasons we can find as to why the spreadsheet will live on. However, my reasons are more aimed at the general approach and attitude to technology adoption and the subsequent poor track record defining and maintaining suitable ownership and roadmap strategies.

What does this imply?

Treasury has proved to be a rather poor owner of technology and the number of treasuries who have implemented ‘multiple’ TMS is testament to this. The initial investment in a TMS is a significant one across many levels (financial and resource). It is therefore surprising to learn how many treasuries are ‘looking for a new TMS’. In many cases, this can be occurring in timescales as short as the standard five-year contracts that are signed at the outset.

I see this as being down to two key factors.

  1. At go-live, many treasuries think that the ‘job is done’, and the TMS is then left to fight for its own survival with minimal oversight, management and worst of all, maintenance. A loose approach to addressing issues on a timely manner, logging bugs with the relevant vendor and a failure to maintain the system at the highest levels (using vendor consultants) is a sure fire way to ensure that the TMS’s operational effectiveness will begin to deteriorate from the levels achieved at the outset.

  2. One of the causes of this is a lack of a clear roadmap (ie defining upgrade policies), and a lack of an annual budget to invest in ongoing maintenance and also to drive new initiatives that will lead to greater automation/efficiencies (or at least to maintain those levels previously attained).

Why does this impact the humble spreadsheet?

Failure to invest and maintain a TMS at its optimum level, over time leads to a decrease in efficiency, an increase in system complexity (ie no clear strategy around configuration/standardisation) and leads to decreases in performance and a confusion amongst users as for how best to implement new processes into the TMS. This ultimately leads to user dissatisfaction and the end result of this is that users become quickly disillusioned with the TMS, and this, in turn, leads to users taking processes ‘offline’ (not in the TMS). This invariably means ‘Excel’, as it often becomes the path of least resistance/pain to help deliver a solution. Hence, its assured place in the treasury technology for many years to come!

In summary, I believe Excel will live on in the treasury space as long as treasuries fail to protect their investments fully into the future by designing and adhering to strictly managed technology roadmap strategies and ensuring sufficient budget is available to maintain/improve the system every year. Failure to do so leaves the door open for users taking process and tasks ‘offline’. I do not believe that a lack of functionality (at least in the leading TMS for 99% of business reasons) is a genuine reason for using Excel in this current age of the TMS.

Portrait of Bob Stark, VP of Strategy, Kyriba
Bob Stark
Bob Stark, VP of Strategy, Kyriba:

Spreadsheets have been popular in corporate finance and treasury because they are simple – and they are right in front of you without having to purchase additional software. Unfortunately, spreadsheets are also incredibly inefficient and create risk for the organisation.

Accuracy

Ninety-five percent of spreadsheets contain errors because people make mistakes with formulas, rekeying numbers or copying/pasting data. There are far too many stories of critical financial decisions made on the back of incorrect data, costing organisations millions of dollars. When dealing with an organisation’s cash and payments, treasury cannot afford such mistakes.

Productivity

Treasury teams require automation for two reasons:

  1. To eliminate time spent on manual tasks so they can focus on analysis and strategic decisions.

  2. To minimise the errors that arise with rekeying and copy/pasting.

While productivity itself does not deliver a compelling ROI, treasury, having time to pursue advanced financial projects, delivers measurable value to the bottom line.

Audit and controls

The biggest complaint about spreadsheets is the lack of security and accountability. Spreadsheets have no audit trails, no separation of duties and offer no capability to manage a workflow. With reported fraud attempts continuing to reach all-time highs, it is imperative that treasury aligns with the audit and control requirements that the rest of the organisation adheres to.

Treasury must embrace best practices such as:

  • Login requiring more than user ID and password.

    Ideally, login should require two-factor authentication and/or single sign-on to the organisation’s internal IT environment. Spreadsheets do not offer this protection.

  • Online access by multiple authenticated users with a complete separation of duties.

    No single person should be able to initiate and approve transactions and there should be structured rules defining how data can be modified. Spreadsheets do not offer such a workflow.

  • Encryption of treasury data.

    Unauthorised users should not be able to open up a spreadsheet or data file and view sensitive treasury information. Spreadsheets do not offer data encryption at rest, relying upon insufficient access or password protections instead.

Data management

Spreadsheets are designed for minimal amounts of data, while at the same time treasury continues to require bigger and bigger data sets. A simple treasury requirement such as cash forecasting requires extrapolation of historical data as well as detailed forecast variance analysis.

Spreadsheets are not designed to make thousands of calculations per second or store millions of records, meaning that file sizes balloon and processing time will range from minutes to hours. Spreadsheets are no longer scalable, meaning that multiple spreadsheets or additional databases are required, adding further complications and risk for treasury teams.

Given that the treasurer’s role is to reduce risk for the organisation’s cash and liquidity, creating new risks by exposing treasury operations to the weaknesses of spreadsheets is no longer acceptable to management or external stakeholders. Spreadsheets are simply an inferior way to manage treasury operations.

Next question:

“How can I make the most of my corporate card programme?”

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