Is Excel still useful for financial closure?

By Onerio Martins, Conciliac

20 July 2018

We are nearly at the edge of a new decade, and as we approach it, developments that once left like science fiction are widely considered part of our everyday lives.

Video calls, smart phones, the end of physical money that every day draws closer as cryptocurrencies and digital transfers grow in popularity, the uptake in near-field communication, digital assistants and machine learning are all examples of how technology has braced humanity in recent years

Technology makes giant leaps every five years, and new companies are coming up with simple solutions to daily problems – creating greater efficiencies and saving resources.

One area often overlooked when considering the innovation wave, however, is data reconciliation.

Most people who need a solution for data matching and reconciliations (bank, stock, balance, and so on) don´t even know that software exists to automate these processes. Instead of using an appropriate software, they are still doing working manually, or with Excel. Informing that marketplace that there are faster, more reliable solutions out there is a distinct challenge for data reconciliation software providers. And some end-users are no doubt concerned that their role will be subsumed by these systems. And while in many instances, data reconciliation is still carried out in Excel spreadsheets, many still rely on working manually, using paper and highlighters which demands many hours of work and resources. It’s difficult to believe that so many have not been seduced by the great potential Excel has always had for managing a company’s numbers.

Excel is   one of the “greatest most powerful, important applications of all time,” writes James Kwak, professor of economics at the University of Connecticut, in his well-known finance blog The Baseline Scenario.

But he also references how JPMorgan lost billions for a copy and paste error in an Excel spreadsheet, providing a stark warning.

“The biggest problem is that anyone can create Excel spreadsheets—badly. Because it’s so easy to use, the creation of even important spreadsheets is not restricted to people who understand programming and do it in a methodical, well-documented way.”

In this sense, the question arises: is Excel useful enough for today's financial closure?

In trade balance reconciliation there is a great risk of human error, such as when copying data inside the worksheets, or across an enterprise resource plan (ERP). Often, the person who performs the task will not even realise the mistake.

While not impossible, it is also particularly difficult to accurately assign responsibility for the work performed in an Excel spreadsheet to a single person. Changes are often made without monitoring or approval, and anyone with access can do so. As companies must have strict control over their financial reports, the risk of lack thereof can be extremely damaging.

Excel is a great utility, but it is not designed specifically for these types of processes. However, there are many companies that are investing in technologies that can automate these reconciliation processes – users of which should enjoy a number of benefits, such as:

• Relieving workload

• Avoid the possibility of human error

• The identification of a bank error to report instantly

• Avoid any loss

Due to the exponential growth in the quantity, variety, and complexity of information currently available, data reconciliation, validation, and consolidation processes will be increasingly complex to address in the future.

Isn’t it the time to move on and adapt, and enjoy the technological and business benefits of reconciliation software?

 

Source: “Spreadsheets - 90+ million End User Programmers with No Comment Tracking or Version Control.” Presented at Balisage: The Markup Conference 2015, Washington, DC, August 11 - 14, 2015.

https://baselinescenario.com/2013/02/09/the-importance-of-excel/

https://www.balisage.net/Proceedings/vol15/print/Durusau01/BalisageVol15-Durusau01.html

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