What’s your biggest tale of woe when it comes to planning and budgeting?
I’m sure you have one. It seems that every finance manager does.
In my recent article, “7 Things Finance Managers Hate About Spreadsheets,” we shared our findings from conversations with experienced finance leaders—uncovering the many reasons they hate spreadsheets, and the one big reason they won’t give them up.
There were three confessions, in particular, that served as prime examples of why finance teams are looking at new, better ways of working with spreadsheets. We have concealed the names and faces of our confessors to protect the innocent. Shhhh!
In a career spanning 30 years, “Jim” has held financial director and financial controller positions in a range of companies of up to $1B in revenue. He tells the story of an acquisition gone wrong due to an easily avoidable error.
“Company A was considering the business case for the acquisition of another company. The financial data submitted by the target company was largely created using spreadsheets.
“On one sheet, which used past performance data to predict future growth, there was a formula error which led to an overstatement of the predicted growth. Despite due diligence by the acquirer, the error was not detected and the acquisition went ahead.
“The purchase price was based partly on historic profitability and partly on future projected performance. Post-acquisition, the predicted growth did not materialize and, when examining the reasons for this, the new management detected the spreadsheet error.
“The warranties in the Sale and Purchase Agreement protected the purchasers and, following a court case, the sellers (all individuals) were required to repay a significant amount of the purchase consideration that they had received.
“Since one of them had led a rather extravagant lifestyle on the strength of his new-found wealth, the court order led to his personal bankruptcy. A cautionary tale not only about the use of spreadsheets but also about warranties in sale agreements and profligate spending!”
Over the past 30 years, “Teresa” has been a key finance manager in a number of positions ranging from global IT, car leasing and, more recently, for a large government organization in Europe. She tells a tale of two solitudes: sales leadership and the board of directors.
“At a large mortgage lender, the board had set strategic goals based on a certain volume of production. But when the sales team put their budget together, they were working to different production numbers, because the high-level strategy hadn’t been properly communicated to them.
“If the discrepancy hadn’t been noticed, it would have meant the sales team being paid commission on different results from the organization’s strategic goals. It was only when finance sat down with the budget holders in sales to walk through their assumptions that it came to light that they were working to a different goal.
“The lesson learned? It’s dangerous to work solely off spreadsheets when consolidating budget submissions. You have to have an ongoing discussion with budget holders to ensure their budgets are properly aligned with overall business strategy.”
You wouldn’t think that something as innocuous as a document name would have the potential to create significant business problems. Yet that’s precisely what “Shannon” experienced in her work with telecommunications and finance industries, where she has been instrumental in budgeting and planning functions across Europe and North America.
“At one company I worked at, we ran a very complex, interlinked set of spreadsheets to manage the revenue budget. The entire set of assumptions for this ramshackle system was contained in its own spreadsheet—which for some reason was simply named ‘Book2.’
“I shudder to think of it: ‘Book2’ could have been just about anything! A document with that name could be easily lost or deleted in error. It just shows how precarious some core, business-critical systems can get when they’re managed with spreadsheets.”
Obviously, no company wants to be caught making these kinds of mistakes. If they are, the business consequences can be disastrous. In our eBook, “Confessions of a Finance Manager,” you’ll find examples of highly publicized cases in which large enterprises took big hits to their brand due to billion-dollar spreadsheet mistakes.
You can also read about a solution to spreadsheet woes: Oracle Planning and Budgeting Cloud. It’s an integrated planning solution that gathers and delivers numbers from all lines of business. It looks just like a spreadsheet, and does all the things that spreadsheets can do—and more. It’s centralized in the cloud—so there’s no need to collect and consolidate individual spreadsheets from all across the company.
With its automated workflow and clear task lists that provide control and visibility over the whole process, Oracle Planning and Budgeting Cloud virtually eliminates the spreadsheet errors that can lead to some of the disasters describes above.
That’s a big win for finance leaders who want to avoid becoming one of those shadowy figures darting into churches late at night, confessing their sins.