If your business is still relying on spreadsheets, you may be a little too accustomed to human error. Studies have shown that simple data-entry mistakes can stealthily add up to critical flaws in your company’s spreadsheets – with an estimated 90% of all spreadsheets containing one or more errors. These errors can leave your company with distorted finance reports, poor bases for decision-making, a sullied reputation – and millions of dollars in losses.
Ray Panko is a professor of IT Management at the University of Hawaii, an expert on bad spreadsheet practices and author of “What We Know About Spreadsheet Errors” – an investigation into the “pandemic” of miscalculations that runs through the world’s spreadsheets. In it, Panko posits that “spreadsheets, even after careful development, contain errors in one percent or more of all formula cells. In large spreadsheets with thousands of formulas, there will be dozens of undetected errors. Even significant errors may go undetected because formal testing in spreadsheet development is rare and because even serious errors may not be apparent.”
While a few errors in the family budget plan may not bring down the house, spreadsheet errors can and do cripple companies in varying degrees of severity. Take for example, the cautionary tale of Canadian power company TransAlta. A simple copy-and-paste clerical error cost the firm a wee sum of $24 million. Even as they checked over the spreadsheet before submitting it (in a process of final review that many spreadsheets don’t encounter) – the energy company missed the basic error and ended up buying power from the U.S. at a price much higher than they should have.
Gather round the bonfire for another tale of spreadsheets gone wrong: The billion dollar error of Fannie Mae, the mortgage loan giant. After the release of its 3rd-quarter financials, the firm discovered a missing 1.1 billion in shareholder equity. A statement put out shortly afterwards explained that “there were honest mistakes made in a spreadsheet used in the implementation of a new accounting standard.” It wasn’t the best kind of publicity.
Spreadsheet shortcomings extend beyond the land of finance – a recent study showed that 1 in 5 genetics papers have at least one error. After some detective work, it was discovered that the majority of the blame lies in the way that Excel automatically formats its data. Many genes have exceedingly polysyllabic names, such as “HECT And RLD Domain Containing E3 Ubiquitin Protein Ligase 2”. In a spreadsheet, it’s written down as HERC2 for short. The trouble begins when genes with names such as SEPT2 and MARCH1 are jotted down in Excel, only to be auto-formatted into the dates 9/2/2016 and 3/1/2016. Fixing these conversion errors involves manually re-checking every potential problem cell in the data stack – an arduous task, to say the least.
The good news is that a number of viable alternatives are popping up to wean your company off its spreadsheet habit. Software-as-a-service (SaaS) options can offer integrated solutions that are infinitely easier to integrate, use and update – making for fewer headaches, less human error and more overall efficiency. Don’t let your business be bogged down by a potential minefield of clerical errors – just say *no* to spreadsheets.