Seventy percent of CFOs risk errors by relying on Excel for finance

Expert commentary has highlighted the risks finance teams face by continuing to manage substantial budgets in unsecured Excel spreadsheets.

Finance departments remain heavily reliant on spreadsheets as a primary tool for planning, forecasting, and reporting, with 70% of Chief Financial Officers (CFOs) reportedly depending on Excel for these functions. This ongoing reliance, however, is under scrutiny due to concerns over data security, compliance, and the potential for costly errors.

Security and control concerns

Sebastian Dewhurst, Founder of EASA, has raised particular concerns regarding the management of sensitive financial information and the possible repercussions of poorly governed spreadsheet use. Dewhurst stated, "Excel is the native language of finance; its flexibility and ease of use make it an indispensable tool for CFOs and finance teams all over. However, the very thing that makes spreadsheets so attractive is also the very thing that makes them risky when used to manage critical financial data. Across various sectors, spreadsheets continue to support a lot of the decision-making for organisations.

70% of CFOs still rely heavily on Excel for planning, forecasting and reporting.* Most of these spreadsheets tend to live on local drives and shared folders, with no version control, no audit trail and little to no security."

Costly consequences

Highlighting the visible repercussions of such practices, Dewhurst referenced specific historic incidents to illustrate the risks. "The risks aren't conjectural or theoretical; they are real and costly. Significant incidents have taken place over the years as a result of spreadsheet mismanagement. One such example is Norway's SWF (Sovereign Wealth Fund) 2022 incident, where an incorrect data entry was entered in a spreadsheet used for balancing Norway's $1.5 billion Government Fund Global, leading to NOK980 million ($92million) being misallocated.

This is not a one-off incident that just happened. Spreadsheet errors cost businesses millions each year, and due to the ease of access, this means that a lot of these do not get noticed until it's too late."

Excel's fit for enterprise finance

On the issue of whether Excel can adequately serve as an enterprise financial system, Dewhurst explained its limitations. "It needs to be made clear. Excel has a clear role to play in the world of finance. However, it was never a tool designed to be an enterprise-level financial system due to the fact that it lacks many core features such as access controls, built-in compliance checks, and other relevant features. As departments grow and processes change, spreadsheets may struggle to keep up. Inconsistent logic, accidental overwrites, and siloed data are just some of the risks that become routine.

In industries or companies with high regulatory standards, these mistakes do not just lead to operational damage; they also create legal risks."

Why reliance persists

Dewhurst acknowledged the reasons behind the continued use of spreadsheets, citing their functionality and familiarity. "So why do finance leaders and CFOs still insist on relying on spreadsheets? The answer often boils down to accessibility, flexibility and cost. Its flexibility allows for rapid modelling, scenario planning and customised calculations that traditional enterprise resource planning (ERP) systems can't handle without significant levels of investment.

Whilst putting these modern tools into play can be seen as expensive and disruptive, these costs are nothing compared to the legal and reputational damage that a single spreadsheet error can cause. However, this level of inaction to these states of affairs is no longer acceptable to ignore.

CFOs need to start asking themselves the question: Are we protecting our financial data, or are we just comfortable with the risk?

Adoption of low-code platforms

In response to these issues, Dewhurst advocated for a balanced approach that accepts the strengths and weaknesses of spreadsheets while integrating newer tools. "The solution isn't to get rid of spreadsheets overnight; it's to accept their limitations and supplement them with tools designed for today's evolving business landscape. Modern no-code platforms present a smarter offering to finance teams, going forward.

These tools merge the flexibility of spreadsheets, along with the structure, security, and scalability of enterprise software. The benefits of this include automated workflows, role-based access, and built-in version control. Many of these no-code platforms are now fully compatible with Excel, which means that CFOs don't have to get rid of years' worth of institutional logic, models, or workflows. Alternatively, they can import existing formulas, maintain familiar interfaces, and build on what already works, all gaining version control and access management.

These features allow finance departments to reduce the level of risk and improve teamwork without sacrificing agility."

Steps for CFOs

Offering actionable recommendations for finance leaders, Dewhurst set out the following approach: "To address these issues, CFOs must start auditing how their teams are currently using spreadsheets, especially in high-risk or regulatory environments. Following that, they need to explore modern finance operations technology that can recreate the speed and customisation of spreadsheets whilst establishing guidelines.

The final change that is needed for CFOs to make is to introduce a culture shift, equipping teams with not only the right tools, but the getting them into the right mindset to move towards more sustainable and scalable solutions."