fast, accurate management reporting - accountingweb

Fast, Accurate Management Reporting:Eight Reasons Why Spreadsheets

May Be Letting You Down.

A LOOK AT THE INADEQUACIES OF SPREADSHEETS

AND AN EXCITING ALTERNATIVE

Executive summary

Spreadsheets—the good and the bad

When spreadsheets excel—and when they don’t

Eight consequences of misusing spreadsheets

1 Time wasted consolidating data

2 Decisions based on unreliable information

3 Reports that say too little, too late

4 Static reporting in a dynamic world

5 No added value over time

6 Vulnerability to staff turnover

7 Lack of a reliable audit trail

8 Inefficient report distribution

The Indicee alternative

Replace the spreadmart without the pains of big BI

How it works—upload, create, share

Indicee vs. the Spreadmart—freeing the financial professional

Conclusion

About Indicee

Appendix I

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Table of contents

Executive Summary

From VisiCalc to Excel, the spreadsheet has played an important role in

helping accountants, financial analysts, and management understand and

run their businesses.

But while spreadsheets are ideal for some tasks, using them as quasi busi-

ness systems for gathering, consolidating, and reporting on large volumes

of data from numerous sources is counter-productive. It’s like cutting wood

with a hammer.

This paper explains when spreadsheets work well, and when they don’t.

It describes the negative consequences for business when spreadsheets are

used inappropriately. And it puts forward a simple, cost-effective alternative

that increases the reliability, completeness and speed of business reporting,

freeing up time for more insightful analysis.

indicee.com 2

Spreadsheets—the good and the bad

When Daniel Bricklin and Bob Frankston developed a “visible calculator” in the

late 1970s, they changed the face of financial reporting and analysis forever.1

Using VisiCalc, accountants and analysts could now create spreadsheets

electronically. Not only was it faster than the traditional pen-and-paper method,

it was more powerful, flexible, and efficient. It promised a huge productivity

boost. It offered exciting new analytical possibilities. And it made the job of

the business analyst in finance departments and beyond a whole lot easier.

Although you can still download VisiCalc, spreadsheets have come a long way

in three decades. With today’s de facto standard, Microsoft Excel, you can do

things not even dreamt of by early spreadsheet users. Excel is firmly entrenched

as an indispensible tool in organizations large and small.

Are you cutting wood with a hammer?

But there is a down-side. Like all good things, there is a tendency to use spread-

sheets indiscriminately—to apply them in situations best handled by other tools.

As the accountant and information technology strategist Richard Morochove

describes it:

The widespread inappropriate use of spreadsheets in business reminds me of the tale

of the poorly trained carpenter who was shown how to use a hammer to drive nails.

Since he was familiar with the hammer, he used it for all his woodworking—even for

breaking a board in two. Most people would agree that a saw is a more appropriate

tool for that job. Similarly, while a spreadsheet is well-suited for some financial

applications, it’s a poor choice for others.2

Inappropriate use of spreadsheets has become the norm in many organizations.

And whether they realize it or not, it is costing them dearly. Business analysts are

spending a disproportionate amount of time consolidating data and crunching

numbers instead of analyzing results. With so much time spent on the mechanical

processing of data, CFOs and business managers are unable to contribute the

kind of insightful analysis that enables good business decisions and, ultimately,

builds competitive advantage.

1 Power, D.J., “A Brief History of Spreadsheets,” DSSResources.COM, World Wide Web, http://dssresources.com/history/sshistory.html, version 3.6, 08/30/2004

2 Morochove, Richard. “Use and misuse of spreadsheets,” 04/2007 http://www.pcworld.com/businesscenter/article/131275/use_and_misuse_of_spreadsheets.html

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When spreadsheets excel—and when they don’t

Like sawing wood with a hammer, using spreadsheets inappropriately is counter-

productive. But how do you know when, and when not, to use spreadsheets?

In its best practices report aimed at helping understand just that, The Data

Warehousing Institute (TDWI) describes two situations where spreadsheets

make sense.3

• One-off reporting without consolidation

Spreadsheets work well for filtering and reporting on data already at hand.

Gathering and linking data from multiple sources is not required, and it’s for a

one-off purpose not likely to be repeated.

• Ad hoc analysis

Spreadsheets are also effective for “on-the-fly” ad hoc explorations and modeling

aimed at helping answer one-off questions and “what if?” scenarios. These situa-

tions are also outside the realm of standard reporting and analysis. They require

little or no data gathering and consolidation. And they aren’t typically repeated

on a regular basis.

But spreadsheets don’t work well when they are used to repeatedly gather, con-

solidate, and report on large volumes of data collected from numerous sources.

When the same process of cutting, pasting, linking, and formula building

occurs repeatedly with a spreadsheet, consuming hours or days of time, then

the spreadsheet is being misused.

These sorts of spreadsheets tend to become quasi business systems that try to

support ongoing processes like budgeting, planning, and forecasting. TDWI calls

the results “spreadmarts,” or “shadow systems.” Others refer to them as informa-

tion silos, or unstructured data. Whatever name you give it, this inappropriate use

of spreadsheets can have a serious negative effect on an organization’s ability to

be productive and competitive.

3 The Data Warehousing Institute. “Strategies for Managing Spreadmarts.” http://www9.unisys.com/eprise/main/admin/corporate/doc/TDWI_SpreadMarts_Report_Dec_07.pdf

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Eight consequences of misusing spreadsheets

Why is it wrong to use spreadsheets this way? There are many reasons.


For starters, it wastes the time of highly trained professionals.

Spreadmarts emerge when data that is critical to understanding a business comes

from multiple sources—something almost inevitable given the proliferation of busi-

ness software in use today. Entering or importing data from those multiple sources

into a spreadsheet, and manipulating it to make sense of it, takes time—typically

the time of highly trained business or financial professionals who should really be

focusing on more value-added activities. TDWI’s research indicates that the average

analyst spends an amazing 2.5 days per week—half of their time—creating and

maintaining spreadmarts.4

Organizations hire and pay accountants and analysts for their financial and

analytical skills. Repeatedly consolidating data from disparate systems in a

spreadsheet, and devising and revising formulas, is a costly misuse of their time.

2 Decisions based on unreliable information

By its very nature, entering and manipulating data in spreadsheets is prone to

error. The results can be as catastrophic as the horror stories compiled by the

European Spreadsheet Risks Interest Group,5 or as simple as the generation of

confusing or misleading information that makes everyday business decisions

difficult and risky.

Robert Kugel, of Ventana Research, maintains that most business users “find

mistakes in data and formulas in the most important spreadsheets they use.”6

This is inevitable, as people try to make sense of massive chunks of data they

have imported, and strive to make everything work together. Even small errors

can result in time and money lost, and lead to a lack of confidence in information

that is supposed to tell people how they are performing and how to do better.

3 Reports that say too little, too late

Once you’ve entered all of that data, even assuming you’ve managed to get it

pretty much right, a spreadsheet is not a good tool for generating reports. As Kugel

goes on to explain, spreadsheets weren’t designed to analyze data with “more

than a couple of dimensions,” such as customers, products, or similar elements.7

What’s more, spreadsheet reports that can’t handle the intricacies of even a

small organization’s operations to begin with, become even less useful when their

intended audience doesn’t receive them until after their usefulness has expired.

Given the time needed to generate, produce, and share less-than-ideal spreadsheet

reports, this kind of “too little, too late” reporting is all too often the case with

spreadmarts.

4 The Data Warehousing Institute, Ibid., p. 16

5 http://www.eusprig.org/index.htm

6 Robert Kugel, Ventana Research, October 15, 2009: http://businessfinancemag.com/article/spreadsheet-alternatives-1015

7 ibid

indicee.com

Are you cutting wood with a hammer?

Spreadsheets are ideal for many things. But using them to perform tasks better done with other tools:

1 Wastes the time of highly trained business professionals.

2 Introduces errors into key business data.

3 Provides inadequate information on which to base confident decisions.

4 Generates static reports, with no drill-down capabilities.

5 Fails to accumulate valuable data and add value over time.

6 Leaves organizations vulnerable to staff turnover, as new people try to understand the spread sheets that predecessors have built and maintained.

7 Doesn’t provide a reliable audit trail.

8 Makes delivering information difficult and inefficient. This leads to poor business decisions and lower productivity. And it dulls the competitive edge needed to survive and thrive.

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4 Static reporting in a dynamic world

The static nature of spreadsheets also makes them a liability when it comes to

business reporting.

As Kugel puts it, in the context of spreadsheets used for planning,” an inability to

change plans rapidly enough, and an inability to drill down to underlying causes

of actual/plan disparities in real time are just some of the almost inevitable

problems that companies face because of the shortcomings of spreadsheets.”8

Financial analysts and others concerned with an organization’s performance must

be able to look beyond the numbers they are handed—to drill down to the levels of

information where their questions can be answered and they can understand the

“why” behind the numbers. They must be proactive, agile, and dynamic—qualities

that are impossible to realize when they regularly use spreadsheets for data

consolidation, analysis, and reporting.


Spreadsheets don’t provide an efficient way of accumulating data for analysis

over time.

Building reports from scratch each month—with the same formulas and tabs

perhaps, but with all new data—means that last month’s data is left behind.

That is data that could be used for historical and trend analysis to help better

understand the business and to plan more effectively.

Spreadmarts focus on the now. They don’t provide an easy way of accumulating

data in ways that enable historic trends and variances to be reviewed and

investigated.


Anyone who has done any kind of in-depth reporting and analysis with spread-

sheets knows the complexity that results too easily and quickly when formulas

must be devised and revised, tabs added and deleted, and calculations defined

and modified. Even when standards are set and best practices followed, everyone’s

spreadsheets are different. Spreadmarts tend to take on a life of their own.

It can be difficult, even for the person who generated a spreadsheet, to under-

stand, debug, replicate, and revise it. For someone new to the spreadsheet, it

can be near impossible. It can mean hours spent trying to understand someone

else’s formulas. When the person who has developed a spreadmart leaves an

organization, it can require a Herculean effort, and result in a period of chaos,

while others try to understand or replace the spreadmart.

8 Kugel, Robert, Ventana Research, October 15, 2009: http://businessfinancemag.com/article/spreadsheet-alternatives-1015

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Spreadmarts don’t generate the audit trail essential for identifying and

correcting financial errors and complying with reporting regulations in an

increasingly regulated business environment. As risk management expert

Steven Minsky puts it:

One of the key challenges within the risk, performance, compliance and business

continuity areas of the corporation is the management of data in spreadsheets and other

office files ... Not only do spreadsheets lack the authentication, audit trail, and integrity,

they also lack accessibility to roll-up information into an enterprise-wide picture.9

Spreadmarts leave organizations open to potentially expensive and

time-consuming auditing issues.


Finally, after you have generated the information your people need to make

better decisions, you still have to get that information to them. Spreadsheets

were not designed to make this fast, easy, or reliable.

When spreadsheet-based reports are emailed to even a few people in different

locations, there is a tendency for them to “evolve”—to change as individuals

make adjustments to reflect their own data or their understanding of measures,

so that version control becomes a problem. Add to this the issue of file size, and

the potential for losing email attachments somewhere in the ether, and report

distribution via spreadsheet is clearly problematic.

9 Minsky, Steven, Risk Management: Problems with spreadsheets? http://www.logicmanager.com/contents/knowledge_center/blogs.php?risk_management_problems_with_spreadsheets

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The Indicee alternative

Spreadsheets are a real boon to accountants, financial analysts, and business

people needing to generate one-off reports or perform ad hoc analysis and

modeling. But using them to repeatedly consolidate and report on large volumes

of data is like sawing wood with a hammer. It’s no way to run a business.

So, what are the alternatives?

The big BI alternative

Until recently, organizations with significant IT budgets have turned to business

intelligence (BI) solutions to improve their reporting and analysis. Traditional

BI solutions gather data from all kinds of applications, assemble it in data

warehouses, massage it into meaningful information, and provide reporting and

analysis tools to distribute and understand that information.

Big BI solutions can be highly effective, but for many organizations they are

too expensive, complex, and resource intensive to be practical.10 They can cost

hundreds of thousands of dollars, take months or years to deploy, require

expensive IT resources to maintain, and demand significant user training to

become effective.

Deploying traditional big BI means spending time understanding an organization’s

information infrastructure, its data sources, the information needs of users, the

ways in which data can best be turned into the right information, and how to get

that information to users. Organizations need to plan and carry out an often long

and onerous implementation process. There are many steps. It is tricky. And no

matter how carefully it is carried out, the results can all too easily fail to live up to

expectations.

Even when big BI deployments do run smoothly, the accountants and analysts that

have given up their flawed-but-familiar spreadsheets often find they have handed

over control of their reporting process to an already overburdened IT department.

The reporting backlogs that result are frustrating for IT personnel and business

users alike.

10 Linthicum, David, “Business Intelligence projects are famous for low success rates, high costs and time overruns,” ebiz: The Insider’s Guide to Business and IT Agility.” April, 2009 http://www.ebizq.net/blogs/linthicum/2009/04/business_intelligence_projects.php

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The perils of big BI.

Enterprise BI solutions are plenti-ful and can be effective. But for many organizations they aren’t practical:

•Theirheftypricetagsmakethem prohibitively expensive

•Theytaketoolongtoplanand deploy, and are susceptible to time overruns

•Considerableusertrainingis needed before they are effective

•Theircomplexitymakesthem risky—they often fail to deliver what they promise

•Theycanleadtoreporting backlogs as financial professionals hand control of the reporting process to overburdened IT departments

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Replace the spreadmart without the pains of big BI

For many organizations, Indicee offers a cost-effective alternative.

Indicee is an online reporting and analysis solution built by the founders of

Crystal Reports—now one of the world’s leading BI solutions. Financial analysts

and other business users who are frustrated with the limitations of spreadsheets,

but not prepared to make the expensive and risky leap to big BI, find Indicee to

be a perfect alternative.

As a “software as a service” (SaaS) solution, you pay a subscription to use

Indicee, rather than having to make a big up front investment in software and

implementation services.

How it works—upload, create, share

Indicee combines data from business applications, provides a spreadsheet-like

interface for organizing the data and generating reports, and makes those reports

easily available to the people who need them. Updating reports in Indicee is fast;

it does not require the repeated cutting, pasting, and linking of data that is

associated with spreadsheets. Indicee also adds value over time by allowing data

to accumulate for historical trend analysis. And all this is done online, using a

simple upload, create, and share process.

The difference Indicee makes—a weekly reporting example

Spreadsheet Workflow Indicee WorkflowCollect business data 30 min

Import, copy, paste and type-in new data 1-4 hrs

Reconcile multi-source data sets 1-2 hrs

Build formulas and data ranges 2-4 hrs

Build pivot table, graphs 2-4 hrs

Analyze results 1 hr

Create links between worksheets 1-2 hrs

Check for errors 4 hrs

Email report to colleagues 5 min

Gather feedback 1-2 hrs

Collect business data 30 min

Upload data to Indicee 5-15 min

Create reports 5-30 min

Analyze results 1 hr

Share with colleagues 5 min

Elapsed time: 2-3 days (repeat weekly)

Elapsed time: 1-2 hours (repeat weekly)

Time saved:2 days of cutting, pasting, linkingand checking

“With Indicee we’ve been able

to move from monthly to daily

reporting, so our information is

more timely and relevant. It’s

more accurate and reliable too,

so it’s easier to make the kinds of

decisions that save us time and

money.”

– DAVID WALLACE

CONTROLLER, TERRA BREADS

Read the full Terra Breads story at Indicee.com

indicee.com 9

Upload the data

Indicee replaces repetitive data entry and manipulation in spreadsheets with a

one-shot upload process.

Data can be uploaded into Indicee for analysis and reporting using the export files

from most business systems. Crystal Reports, comma-separated value (CSV) files,

and spreadsheet files, can all be uploaded to a secure Indicee site, where the data

is available for report creation.

Create the reports

Indicee makes it a whole lot easier to organize data in meaningful ways.

Accountants and analysts generate reports with a spreadsheet-like interface,

using plain-language questions like “What were the five top-selling products last

month?”, “How much product wastage did we experience in the past week?”, and

“Who were our leading performers this year?” The self serve interface ensures

business and finance users are self reliant for their reporting needs—avoiding

the report backlogs typical of big BI solutions.

Unlike the repetitive spreadmart approach, setting up a report in Indicee is a

“one-shot” deal. You design your report once and then update it in minutes

simply by uploading the latest data files. New questions can be asked any time,

to generate additional reports or analyses.

Share the results

Indicee also makes it easy to get reports to their users. Instead of emailing spread-

sheets, Indicee reports are made available to authorized personnel online—any

time. People sign in and use an intuitive interface to view the reports they need

and to which they have been granted access. They can use the data that makes up

those reports to perform their own ad hoc analysis, drilling-down to understand

anomalies, and identifying ways of improving business performance.

Instead of starting fresh every month, the data uploaded into Indicee accumulates.

Combined with the ease of revising reports and adding new ones, it means organi-

zations gain the ability to compare performance over time—for example, to assess

seasonal changes in product demand and other trends that help them plan and

perform better.

“Indicee reports are a godsend.

Access to fundamental sales data

in this company has gone up 1000

percent.”

“What used to take almost a full

week of inputting data into an

Excel spreadsheet now takes just

hours with Indicee. Our agents

now get the information they need

directly from Indicee. I don’t have

to export it to another system, and

they don’t have to wait for it.”

– BEN HUME

CEO, ALCO VENTURES INC

Read the full Alco story at Indicee.com

– WILLIAM SMITH,

SALES AND SCHEDULING ANALYST,

COSMETICS GIANT

Read the full story at Indicee.com

indicee.com 10

indicee.com

Indicee vs. the Spreadmart—freeing the financial professional

Indicee addresses the shortcomings of the spreadmart with none of the

downside of big BI.

Information needed to perform better is available in a far more timely fashion.

The problem of version control caused by report distribution in a spreadmart

world is gone. And, by eliminating the error-prone process of cutting, pasting,

and linking data, Indicee enhances the accuracy and reliability of business

information.

With Indicee, valuable data is kept secure in a controlled environment, where it

can be used to generate new reports as they become needed. As data accumulates

over time, analysts can use Indicee to build a more complete picture of business

performance and trends.

By providing a fast, self-serve way to consolidate, analyze, and report on data,

Indicee liberates finance professionals from hours spent repeatedly consolidating

data in spreadsheets. It frees them to focus on the kind of analysis that makes

them proactive advisors to the business instead of back-office book keepers. And

it replaces an organization’s static spreadsheets with dynamic reporting that can

grow and change quickly as the business evolves.

Conclusion

While spreadsheets are useful for one off analysis and modeling, they are not

ideal for repeatedly creating reports from large volumes of data. A growing

community of users are now replacing their spreadsheet based systems with

Indicee. By doing so they are improving the timeliness and reliability of

their business information. They are also freeing up their analysts’ time to

develop the kind of insight that enhances business performance and drives

a competitive edge.

Find out how Indicee can enhance your business insight.

Go to www.indicee.com/solutions.

About Indicee

Indicee is based in Vancouver, Canada. The company is dedicated to helping

ordinary business users consolidate, analyze and share their business data

through a web-based software-as-a-service (SaaS) application that is both

simple and secure. Created by the original founders of Crystal Reports, Indicee

is led by some of North America’s most respected business intelligence experts,

social media innovators and software developers.

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Appendix I – Indicee vs. the Spreadsheet

indicee.com

A quick and easy upload process replaces manual data entry and consolidation. “One-time” report organization using plain-language questions in a spreadsheet-like interface organizes the data.

By eliminating the repeated cutting and pasting of data, errors are avoided, along with the tedious data entry process that causes them.

Flexible reporting and analytical capabilities, and ease of adding new data sources, provide a com-plete picture of operations. Rapid updating of reports by simple file uploads brings business insight quickly to those who need it.

Drill-down and other analyti-cal capabilities provide dynamic reporting for both the people who generate the reports and those who use them.

Data automatically accumulates online over time.

A simple, upload, create, and share process eliminates the complexity of spreadsheets, and is easily understood and learned.

Data relationships and structures are clearly defined ensuring consistency and a clear audit trail.

Secure, online access to reports for authorized personnel means no emailing is required.

Financial professionals spend less time on menial tasks and more time proactively providing the strategic advice needed to run the business better.

Accurate reports provide a single version of the truth, enabling confident decision making.

Reports can be generated more quickly and frequently, and easily revised to accommodate changing needs. The people who need them, and who are authorized to access them, can do so online whenever they want.

Reports can be revised quickly, to accommodate changing business demands. Drill down to discover the “why” behind the numbers, answer business questions, and make better and faster decisions.

A growing data base provides in-creasing value, enabling historical and trend reporting and analysis.

Reporting capabilities are not affected by changes in staff.

A reliable audit trail that saves time and helps meet statutory requirements.

Information gets to the people who need it when they need it, so they understand what is happening with the business, why it is happening, and can take steps to improve business performance.

Spreadsheet Problem


3 Reports say too little, too late

4 Static reporting in a dynamic

world





2 Decisions based on unreliable

information

Indicee Solution Business Results

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