Do we really need to quit our spreadsheets?
Ok, so we’re all agreed that for ad-hoc analysis Excel is the tool of choice, and that at the other extreme of a corporate application we need the ruggedness of a software application… the problem as I see it is that accountants don’t usually start out intending to write huge spreadsheets… workbooks just grow over time! They usually start innocently enough as a quick report or back-of-the-envelope analysis, and then get added to continuously until one late evening you stop yourself in your tracks and realise just how detailed your model has become…
So is this a bad habit that we should be trying to quit, like the inference in this discussion that it’s like trying to kick the nicotine habit? I don’t believe so, because analysis is a vital part of an accountant’s role, whether in practice or business, and analysis by its very nature continuously evolves and morphs as ideas develop and new information becomes available.
The solution, in my book, is to embrace Excel warmly with both arms for all our analysis needs, for the very reason that it does allow this flexibility for our ideas to develop and grow, but then to force back to the software industry the challenge of providing us the power and reliability of an application from within Excel, to fix all the problems that we have identified re data manipulation, formula integrity, documentation, and so on.
By and large the BI/database industry has started to fall into line with this user-driven objective, because they all now provide Excel interfaces to input and extract data from their various cubes and structures.
Re the formula integrity side there are Excel-based solutions too, which broadly fall into the two possibilities of either correcting your hand-built formulas after you’ve set them up, or else using formal structures to build integrity into your spreadsheet before you start adding all your custom analysis and ideas.
Probably the best example of the post-hoc formula correction tools was Spreadsheet Professional, which power users tell me was extremely widely used, especially in the Big 4 modelling groups. However, I’m also told that most of its features have now been superseded by Excel’s own error checking facilities, so I would be interested to know whether anyone still uses Spreadsheet Professional any more.
Re the idea of getting a piece of software to actually build for you your detailed forecasting formulas into your spreadsheet before you start playing with it, I only know of one mainstream solution, Rugged Logic (www.ruggedlogic.com). This software impressed me enough when I discovered it recently that I made a personal investment in it (he said, doing the honest thing and declaring his interest in this blog topic!).
Rugged Logic is the only Excel-based software solution that is accredited by the ICAEW and gives an accountant the most detailed and robust starting point he could dream of for a financial forecasting spreadsheet, including detailed formulas for working capital, capex, loans, taxation and so on, with report sheets already set up for P&L, Balance Sheet, Cashflow and all the normal schedules. Since its in Excel, the creative accountant (yes, personally I believe they do exist , and there are plenty of them!) can go on to add all his or her ad-hoc analysis sheets and business drivers, safe in the knowledge that the core logic was built by a computer with thousands of checksums built in to boot.
