9 Ways Excel Hinders Financial Planning and Analysis, and What to Do

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For many organizations, financial planning and analysis (FP&A) processes are initiated in Excel due to its ease of use, flexibility and user familiarity. While Excel is a powerful tool that allows users to organize, analyze, and visualize data, it has its limitations.

Enterprise planning management (EPM) software, such as Workday Adaptive Planning, picks up where Excel drops off. Unlike Excel, EPM tools consolidate data from various sources into a unified, real-time view, facilitating informed, strategic decision-making and promoting cross-departmental collaboration, ensuring that operational plans align with overarching financial goals.

Recognizing when it’s time to move from Excel to an EPM tool can be hard. Here are nine red flags that indicate it’s time to make the switch.

1. Processes Centralization

As FP&A process components expand, managing Excel becomes more complex. In an Excel-supported environment, data is often dispersed across multiple spreadsheets and workbooks to be updated, managed, and consolidated by each user. It’s decentralized, which can lead to inefficiencies, inconsistencies, and a lack of transparency, hindering budgeting and reporting processes.

2. Version Management

Version management in Excel can be a daunting task. As changes are made to spreadsheets, keeping track of different versions can become complex and confusing. Without a built-in version management system, there’s a risk of overwriting important data or losing track of the most updated version, leading to potential inaccuracies and inconsistencies.

3. Multiple Spreadsheets

Managing multiple spreadsheets in Excel is a common challenge. As the number of spreadsheets grows, so does the complexity of managing and consolidating data. This can lead to errors, duplication, and a lack of visibility across different data sets. Manually consolidating data from multiple spreadsheets can be time-consuming and introduce errors.

4. Scenario Planning and Comparison

While Excel allows for scenario planning, it can be difficult to manage and compare multiple scenarios. Creating what-if scenarios in Excel often involves manually changing input values and recalculating results, which can be tedious and error-prone. Additionally, comparing scenarios can be challenging due to the lack of a streamlined comparison feature.

5. Rolling Forecasts

Creating rolling forecasts in Excel can be a complex and time-consuming process. It involves manually updating data and recalculating forecasts, which can lead to errors and inconsistencies. Moreover, Excel doesn’t provide a straightforward method of visualizing rolling forecasts over time, making it difficult to identify trends and make informed decisions.

6. Historical Data Integration

Integrating historical data in Excel can be challenging due to the lack of a built-in data integration feature. Without this functionality, inputting historical data requires manually importing and consolidating data from different sources, which can be time-consuming and prone to errors. Additionally, ensuring the accuracy and relevance of historical data can be difficult in Excel due to the lack of data validation and cleaning tools.

7. Multiple Data Sources

Managing multiple data sources in Excel is another significant limitation. Importing data from different sources often involves manual data entry or copy-pasting, which can lead to errors and inconsistencies. Excel doesn’t provide a straightforward way to integrate and synchronize data from different sources, making it difficult to maintain a single source of truth.

8. Formula Management

Formula management in Excel can be complex and error prone. Creating and updating formulas often involves manual coding, which requires a deep understanding of Excel's formula syntax. Excel formulas are also prone to errors due to issues like incorrect cell references or data types, leading to inaccurate calculations.

9. Data Integrity

Ensuring data integrity in Excel can be a major challenge. Excel doesn’t provide robust data validation and error-checking tools, making it difficult to prevent data corruption, duplication, or loss. This can lead to inaccuracies in financial reporting and decision-making. Excel's lack of access control features makes it difficult to prevent unauthorized changes to data, further compromising data integrity.

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For more information on how an EPM tool can benefit your organization, please contact your Moss Adams professional.

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