7 Signs it’s Time to Break Up with Excel
I remember the first time I created a financial model in Excel. It was during my early college years and the assignment was to forecast the net profit of a fictional company based on a variety of inputs. It was then that I understood Excel could do so much more than I ever thought. I thought we’d be together forever. But over time, things change. The amount of information I received got larger and formulas more complex. I finally reached a point when I realize all good things must come to an end. There were plenty of signs solidifying that decision.
Today, I want to share the top 7 growing pains of Excel.
1. You’re spending more time maintaining the file rather than analyzing it.
As your business evolves, the methodology of how you measure your business should also evolve. The ability to adjust calculations and formulas with ease will inevitably become difficult as your data grows and needs change. If you’ve reached this point, you know it. Time is money. The ability to analyze your results to make key decisions —without endless hours of manual formula edits or data clean-up— outweighs the cost of implementing a solution.
2. There are inconsistencies in methodologies.
Larger models carry an increased risk for maintenance errors, but what many people don’t realize is there is also an increased risk in maintaining a common definition of how the business is viewed and organized, along with a common calculation methodology. This challenge applies to all tools; however, it is more difficult to manage when your ability to govern the model is limited.
3. You’ve described loading data into your Excel model as a painful process.
Raise your hand if the data files you receive are 100% ready to upload to your model. I can’t see you, but I’d be pleasantly surprised if anybody has their hand up. The manual effort of editing a file from an external source with variations in naming conventions and formatting is time-consuming and easily the most painful step in the entire process. And even if you were lucky enough to receive a file in a perfect format, most likely manual effort would be needed to copy and paste it into the model.
4. You ask “Is the data is up-to-date?” more often than not.
Loading data into an excel model can be manual, time-consuming work, but it is relatively straight forward. Knowing that the data in the model is the most up-to-date is a more ambiguous question. This question is even more applicable to any updates made by team members. Excellent communication reduces the risk but will never eliminate it. By 2020, 72.3% of the US workforce will be mobile, which will make communication more difficult as interaction between co-workers becomes increasingly virtual.
5. There’s no single version of the truth.
Versioning becomes particularly troublesome during a planning cycle. Far too often you end up with multiple models with slight variations–all labeled “final.” Time is wasted reconciling any discrepancies potentially unnecessarily extending the planning cycle.
6. You’re constantly reconciling results.
You are reviewing your results and notice that a number is not what you expected. You want to drill into the details to see what the issue is, if there even is one at all. At this point, you have entered the maze of worksheets and formulas powering the engine of your workbook. Complexity of the maze depends on how well it’s organized, which becomes increasingly difficult to manage as the business grows. Hours spent researching discrepancies within the model could be better spent on analysis to support your strategic decisions.
7. Sometimes it just crashes.
The growing size of your model will eventually cause a poor user experience. Spending time waiting for your Excel to calculate after a change is annoying. Turning off auto calculation helps, but requires a mental note to manually execute the calculations to refresh the results. When the model gets too large, very little can be done to prevent the scenario that every financial analyst fears: Excel crashes without changes being saved. At this point, you need to realize that it’s time for an enterprise solution.
