Insight & Analysis

To Excel or to not Excel?

Person looking through Excel document print outs

The Excel package has been around for decades and remains a vital part of many treasurers’ toolkit. How to explain its enduring popularity? What are its pros and cons?

Treasurers are constantly being urged to adopt the latest technology but there is a piece of software that was launched way, way back in 1985 that many remain devoted to despite the availability of more sophisticated options: Excel.

Indeed, according to a recent study by Aite Group, more than half of companies (51%) still use spreadsheets as their only treasury technology. And Excel-loving treasurers clearly do not believe they are wasting their time, as suggested by a Kyriba survey last year. The study concluded that global treasury teams are wasting an average of 4,812 hours per year using traditional spreadsheets to manage their cash, payments and accounting operations.

Martijn Groot, VP of Marketing and Strategy, Asset Control, a data management solutions provider, has been pondering treasurers’ long-standing enthusiasm for Excel, looking to come to an objective assessment as to why it is still so widely used.

He says: “Excel has often been seen as both a blessing and a curse and it is definitely a testament to the power of the tool, as well as the quality of the marketing and distribution that supports it, that its usage remains so widespread today.”

Groot says one of the biggest benefits of Excel, outside its pure functionality as a data organisation and analytics solution, is that there is zero threshold to using it: “Its prevalence and ease of use is such that people can start working with it quickly and easily and get fast results and immediate gratification.”

He adds: “We all know the downsides of course. Many have experienced the challenge of key person dependency, which tends to surface whenever a 100MB spreadsheet comes to light with macros nobody understands, apart from the employee who created it, who is now either on holiday or no longer with the company.”

Horses for courses

Another key risk associated with Excel is duplication of data. Different versions of Excel, all with their personal tweaks, often float around organisations and nobody keeps track of them. The third, and arguably most important risk factor is where Excel is used for the wrong purpose across the organisation: “Operational risk and risk of data noise is introduced when Excel is used as a step in a data processing chain rather than merely as an endpoint for presentation or reporting, or as a data source. That, for me, gets to the heart of the matter. Excel can and should have a part to play in data management but it needs to be used in the right manner.”

Jonas Falk, Managing Director, SKF Treasury Centre Asia & Pacific, is sympathetic to Groot’s analysis: “I agree – always use Excel with care. I personally use it quite a lot actually, normally to export cash flow data from our treasury system (Quantum) and then play around with the data and slice and dice it in Excel. I also use it to create graphs for reporting.”

Groot has developed a novel analogy to further explain his thinking: “If we compare the space of data management solutions to the realm of transportation, I think Excel occupies the spot of cars.

Cars are easy and accessible. They are often parked right in front of your house. Everyone can use them. However, when everyone uses them, you tend to get stuck in traffic. Plus they pollute. And you have adverse side-effects.”

“Mass transit is better in many ways. Where cars work very well is in last-mile connectivity. Bringing you from your house to a transport hub. Moving 2,000 people for 100 kilometres between two cities is best done by train. Transporting 200 people 1,000 kilometres between two cities, with or without a stretch of sea in between, is usually best done by plane.”

End point applications

For Groot, the same pattern of thinking applies well for Excel. It undoubtedly has a role, he says, but it is important organisations don’t overuse it or use it for the wrong purpose. “You would not cycle 100 kilometres to work, and you would never even consider constructing a high-speed railway line using just five kilometres of track, or building two airports to bridge a ten kilometre transport route.”

So, in that context, his advice is that treasurers should consider using Excel for that “last mile connectivity” and start seeing it as part of the solution rather than the problem. Excel can work well in conjunction with a data management backbone but for Groot, the best case scenario is that it should act as the end point, either as the point of data creation in the form of a report or a presentation for example, or as a data source.

“Many organisations use Excel to create their own local models – and that is a legitimate use. The data can be submitted – with or without context, such as the business logic and/or calculation parameters – to a data management system as one input source. An example here is front office traders or portfolio managers submitting pricing information using Excel. The data management system could then combine these inputs with external data sources, keeping track of audit, lineage and source changes.

At the other end of the process, Groot ideally sees Excel being used to tap into a data infrastructure in order to create a source of trusted information for anyone looking to do quick calculations or preparing MIS reports.

“Excel is overused and when it forays into use cases where it is inappropriate it leads to operational risk, key spreadsheet dependency and version control nightmares,” says Groot. “However, if you put proper bidirectional integration behind it, Excel can be critical for any industrial-strength solution. Indeed, Excel and a proper data management backbone working in tandem is an unbeatable combination.”

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