Think beyond the spread sheet!

This blog was recently published in the FPA_March2013 newsletter

A recently released white paper from the Association for Finance Professionals (AFP) shows that amongst other things, it is extremely important for finance professionals to have advanced excel skills and the ability to validate data. I couldn’t agree more. Advanced Excel knowledge is a must for every finance professional. Even in businesses with advanced IT environments and with seamlessly integrated systems, the spread sheet is still the most flexible piece of calculating software.

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There is no better way to quickly gather some information from different people around the business and calculate some numbers. There is no easier way to simulate opportunity and risk scenario’s in a P&L and discuss and communicate the results across functional areas.  And the basics are really easy to learn. This ease of use and flexibility must be the reason that more than 30 years after the introduction of Lotus 1-2-3 from IBM and Excel from Microsoft, the spread sheet is still king. Some of my own research on planning suggests that 85% of users still use the good old spread sheet. Other surveys show similar results between 60% and 90%. In my role as integrated business planning manager, I monthly present an 18 months rolling EBIT number to our managing director. A lot of cross functional information needs to be gathered for this, but all the P&L lines come together in a spread sheet and that’s where the EBIT number is calculated.

Having said all this, we have to understand the risks of using spread sheets and more important, the finance professional has to understand the world beyond the spread sheets and the numbers.  The risk of spread sheets are many and not limited to non-centralized data, multiple numbers and plans rather than one integrated plan, formulas that are only understood by the creator and can’t be re-engineered or non-compatible Excel versions.  Still, with good version management and documentation on how the spread sheets and processes works, many of these risks can be limited, and the spread sheets can thrive as an add-on reporting tool on top of the enterprise or business intelligence systems.

What is more important  to understand for the finance professional, is that at a certain point in time, it is not only about the numbers anymore. Sometimes the information or the numbers are simply not there, as there is uncertainty in the world around us and assumptions and rough estimates have to be made. These estimates and assumptions often have to be agreed with a functional owner to come to an integrated consensus.  Assumptions on sales volumes and price points, production yields, material consumptions, market growth or truck utilization cannot be made by finance professionals only.

This is where finance business partnering, relationship management and influencing of the functional owner or business unit comes in.  This is also where the usually logical, analytical left brain finance professional has to tap in to right brain and understand the emotions and behaviours in decision-making and how they can be impacted by different people and cultures. It is important to realize that under pressure of time and politics decisions are often not rational.  Furthermore perceptions on quality, prices and performance differ from person to person within a company and even more in different geographical locations where different cultures, values and motivations play a role.

Before you make a report or go in to a presentation, of course you have to triple check the outcome of your spread sheet and make sure the numbers add up.  It is as important to have aligned your assumptions with functional business owners, understand time pressures, politics and your cultural environment. If you didn’t take the time to business partner, influence and understand perceptions of your stakeholders, you might find yourself in the situation where your spread sheet was right, but your advice was disregarded and the decision went in the exact opposite decision.

That’s when you realize you had to think beyond the spread sheet!

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