Even after being extremely careful to ensure all data is entered correctly and accurately, we can’t deny that, when working with spreadsheets, the chances of something going wrong are very high.
One mistake can make a huge difference in the overall picture and, as detecting mistakes isn’t always simple, one small slip up could start a domino effect.
Studies show that 88% of spreadsheets used at companies contain errors.1 With this figure in mind, and considering how many companies use spreadsheets to run their business, the potential for major misreporting is a concern.
In 2015, the Telegraph published an article2 stating that “almost one in five large businesses suffered financial losses as a result of errors in spreadsheets” and went further to say that “spreadsheet calculations represent up to £38bn of British private sector investment decisions per year, data harvested through YouGov. Yet 16% of large companies have admitted finding inaccurate information in spreadsheets more than 10 times in 2014.”
It’s not hard to find examples of unacceptable situations as a result of spreadsheet mistakes. For example:
- In 2013, George Osborne based government cuts on a report that had a few rows missing.3 Initially, the report concluded that countries with a public debt of 90% see their economies shrink by 0.1%, when in actual fact, it should have shown that these countries would grow by 2.2%;
- A spreadsheet error led the 2012 London Olympics organising committee to oversell four synchronised swimming sessions by 10,000 tickets.4 All because a staff member mistakenly entered the number 2 instead of 1, indicating there were 20,000 remaining tickets available instead of 10,000;
- In 2008, Barclay’s accidently acquired 179 more contracts with their purchase of Lehman Brothers assets than they intended.5 The cells containing these contracts were hid in the spreadsheet (instead of having been deleted) and when the file was converted to a PDF, they became visible again;
- Mouchel Pension Fund saw £4.3 million of their profits being written down due to a spreadsheet error6 in a pension fund deficit caused by an outside firm of actuaries. Besides the hit on profits, this incident caused their share price to drop and their chairman to resign;
- J P Morgan, back in 2013, maintained their VaR (Value at Risk) model manually, operating through a series of Excel spreadsheets7 by a process of copying and pasting data from one spreadsheet to another. Due to the pressure added to the Model Validation and Quantitative Research, they overlooked operational flaws apparent during the approval process. Due to the discrepancies, J P Morgan faced legal action and lost considerable market share.
Besides mistakes on spreadsheets…
It’s not only the risk of mistakes on spreadsheets that can impact companies’ financial position. As the process is usually manual, it is also very time consuming. How much could this cost your business?
How can you guarantee security and data integrity when using spreadsheets? As spreadsheets could be used by several staff members, shared via non-secure channels (such as emails), it is difficult to have control over who can modify or see your information.
With LIBRIS Financial, you reduce the chances of manual error, as well as improve efficiency on financial processes. Our software performs all calculations for you and issue warnings for any discrepancies as soon as the data is entered, meaning you can easily and quickly amend it to ensure your information is always accurate.
LIBRIS Financial has been developed with a wide range of functionality, making it able to fit 100% with your business processes.