Cash & Liquidity ManagementCash ManagementSelf-Inflicted Pain: 7 truths treasurers won’t accept about spreadsheets

Self-Inflicted Pain: 7 truths treasurers won’t accept about spreadsheets

The problems associated with spreadsheets are well documented. From the risk of errors to the lack of security controls, there are many reasons why treasurers should avoid using spreadsheets as their primary management tools.

The problems associated with spreadsheets are well documented. From the risk of errors to the lack of security controls, there are many reasons why treasurers should avoid using spreadsheets as their primary management tools.

Nevertheless, many treasury professionals continue to overlook these shortcomings. Some may not fully understand the risks associated with spreadsheets, while others may not fully understand the benefits of the alternative: investing in a dedicated treasury management solution. Despite the strong adoption of these modern platforms, many treasurers remain stubbornly committed to using spreadsheets for everything from cash flow forecasting to FX hedging. According to research from Association of Corporate Treasurers (ACT), spreadsheets are still being used by more than a third of UK-based treasury departments, a percentage that is similar to studies from the Association for Financial Professionals (AFP) in the US as well. This was particularly true for smaller corporates (between $500m-$1bn in annual revenue), where 46% said they were still using spreadsheets.

Why spreadsheets are unsuitable

Using spreadsheets in a treasury environment is a risky decision for a number of reasons. Here are seven truths that treasurers need to accept:

Spreadsheets introduce operational risk. Research published by Dr. Ray Panko at the University of Hawaii once found that more than 88% of spreadsheets contain errors. These errors can take different forms, from inputting errors to incorrect formulas and missing data. In a treasury environment, this means that spreadsheets bring operational risks – and the possible consequences can be severe, from losing the CFO’s trust in the system to overstating profits or analysing market exposures incorrectly.

Spreadsheets introduce “key person” risk. In the context of treasury, spreadsheets can be large and complex. The person who designs and uses a particular spreadsheet may have a clear understanding of how that spreadsheet works – but what if that person goes on long-term sick leave, or suddenly leaves the company? The risk of errors is likely to increase further, while deciphering an overstuffed, highly complex spreadsheet may take time that the treasury just doesn’t have.

Spreadsheets waste time. Even when everything is working as it should, spreadsheets are associated with manual, inefficient processes, such as gathering information from a variety of different sources and re-keying that information into the spreadsheet. This all takes time that could be better spent on more strategic and value-added initiatives.

Spreadsheets lack security controls. Fraud and cybersecurity are a major concern in today’s digital environment. Spreadsheets lack the sophisticated application security controls that are included in best-in-class treasury solutions, such as data encryption, multi-factor authentication, IP filtering and single-sign-on. Additionally, multiple copies of spreadsheets are not traceable, and don’t have controls such as denying user authentication when an employee leaves the company.

Spreadsheets do not support compliance. Furthermore, spreadsheets are not equipped to provide the type of clear audit trails that increasingly needed for reporting and compliance purposes.

Spreadsheets do not support business continuity planning (BCP). Unfortunately, disaster can strike at any time. Unlike cloud-based treasury solutions, which can be accessed anywhere from any device, spreadsheets may be rendered useless if the company offices become inaccessible, or a laptop is destroyed. If internet access is lost or if employees are unable to leave home. And unlike other financial software, treasuries often do not have adequate business continuity processes in place for their spreadsheets.

Spreadsheets are drudgery. Last but not least, whether treasurers admit it or not, the use of time-consuming, manual technology is not enjoyable – so the use of spreadsheets can have a deeply negative impact on job satisfaction, morale and, ultimately, staff turnover.

Any one of these issues should be reason enough to revisit the irresponsible use of spreadsheets in treasury. Taken collectively, however, the risks, inefficiencies and inconvenience associated with spreadsheets represent a major liability that is too big to ignore.

Misconceptions revisited

Meanwhile, treasurers may have had justification in the past for continuing to use spreadsheets – but as treasury technology delivery models have evolved, these reasons no longer stand up to scrutiny:

  • TMSes are expensive. This is a misconception, especially relative to the return on investment they provide. While it is true that spreadsheets are a low-cost option, cost is not the barrier it once was when it comes to adopting a best-in-class treasury management system, especially cloud-based models that are more scalable and cost effective.
  • TMSes are difficult to implement.This is an antiquated point of view. Treasurers may feel that they do not have the time or resources needed to implement a treasury management system. But the implementation process is greatly streamlined when using today’s cloud-based systems – and time and resources will likely be freed up once the new system is in place.

In conclusion, ignoring the harm spreadsheets can cause is no longer excusable. In light of the sophistication of best-in-class treasury solutions, and the availability of these solutions via the cloud model, it’s time to accept the truth: spreadsheets are a valuable tool in many situations – but they are not fit for purpose as the primary tool of a modern treasury.

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