We’ve been discussing the over 17 billion opportunities to both manipulate data to produce complex results, and the subsequent risks that are attached to each and every cell. Although spreadsheets comfort us because they conveniently compute and crunch numbers on our behalf, the potential for human error increases exponentially with each key stroke, leaving companies who rely solely on Excel vulnerable to expensive and potentially catastrophic mistakes.

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Most CFO’s cite issues with their spreadsheets that more often than not correspond directly to a lack of verification of data and formulas by the person on the other side of the screen. Let’s discuss some of the risks we experience when we rely solely on the combination of Excel and human error for critical business computations generated by the tax department.

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Dueling Spreadsheets and Security

The moment a workbook is distributed to someone other than its creator, a dueling spreadsheet is created. The information and calculations contained in this spreadsheet is now duplicated, leaving it exposed to manipulation. Once multiple copies of one spreadsheet exist that allow various sets of hands to touch them, competing information exists. Data is updated, multiple users are interpreting the information, and it becomes impossible to maintain the integrity of the content. That’s just with a unshared spreadsheet. A shared Excel workbook can be edited by multiple users concurrently, opening up a can of worms that might never be able to be closed again. Excel spreadsheets can only be protected on so many levels of security, which are quickly watered down each time the file is passed on to the next person.

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Training

The ability to create and execute complicated formulas in an Excel spreadsheet is a skill that requires training and education to master. It’s likely that few people at any given company have the knowledge and skill set to produce the desired output required and necessary for the financial close process. This means that not every employee who needs to pull data from the various Excel spreadsheets has the ability to manipulate them properly, creating a lag in time, money, and resources. The qualified person is either overworked, or funds and man hours have to be invested in training employees.

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Lost Time

As mentioned above, training and maintaining qualified individuals to manipulate the formulas and computations in Excel spreadsheets requires hours of manpower, but that’s not the only area where precious company time can be lost. For every new output a company requires, a new formula must be created or tweaked, which means someone has to copy and paste those formulas over and over again. If we want Excel to provide a new answer, as a user we have to ask it a new question, which requires time, and in turn, dollars.

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Employee time and training are two of the most valuable investments a company can make, so it’s vital that they aren’t wasted. Although Excel spreadsheets provide businesses with a variety of flexible integral functions that can be vital for computations and reporting, someone always has to be on the other side punching the right keys at the pivotal moment. Each of these spreadsheets have to be created and maintained by a human being, creating just as many opportunities for mistakes and lost time. We need Excel, but it also needs us, which raises a question. Could our minutes and money be more efficiently utilized elsewhere?

A single worksheet in the current version of Microsoft Excel^® is comprised of 17,179,869,184 cells. Yes, that’s over 17 billion cells, and over 17 billion opportunities for errors and risk. The prior version of Excel had 16,777,216 cells in each worksheet.  The massive amount of data that can be stored and manually manipulated provides Excel’s users with not only a nearly endless array of information, but also a nearly endless opportunity to make errors.

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With tax laws continuously evolving and the sheer number of uncontrolled cells at our disposal, the risks of overreliance solely on Excel to manage tax processes cannot be ignored. When it comes to our corporate tax processes, the more we can trust systematized technologies, the more confident we can feel with the output generated.  Let’s discuss some of the risks we experience when relying solely on Excel for critical business computations generated by the tax department.

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Formulas

Formulas that can be included in one Excel spreadsheet can range from straightforward addition and subtraction to complex including data push and pull from external sources. As we add layers of formulas to produce the calculations we need, our spreadsheets become more convoluted, causing a slew of inefficiencies that could result in delayed financial statements to inaccurate totals. If one single symbol or number is incorrect in just one formula, every dependent cell connected to that formula is now erroneous. Just ask JPMorgan Chase, who suffered a $6.2 billion trading loss because of a formula that added amounts rather than averaging them.  

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Hidden Cells

Appearances can be deceiving, especially in Microsoft Excel^®. It’s hard to beat the convenience of the ability to hide a few columns and rows of information to make navigating around a spreadsheet easier and more visually appealing. However, even when you can’t see hidden cells in Excel, the information is still there, and it’s still potentially affecting every other number in your workbook. Barclays learned this lesson the hard way when they were forced to purchase nearly 200 unwanted assets from Lehman Brothers.  

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Links

Embedded links can make pertinent information user friendly and easy to navigate to, but they’re often less than reliable. Links among various workbooks within Excel can work for a minute, but with heavy usage and file movement and updates, they run the risk of severing without being noticed. Active external links carry even more risk, particularly if they link to a website or a separate file. Website data becomes stagnant, files are moved and renamed, and before long those links lead to dead ends, creating the potential for chaos in your calculations.  

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Although Excel spreadsheets are necessary and provide a variety of integral functions and ad-hoc calculations for businesses, companies are putting themselves at significant risk by relying solely on the accuracy of spreadsheets with over 17 billion cells in a single worksheet for their corporate tax processes. We need Excel, but we need more than only Excel, and companies are learning this expensive lesson 17 billion cells and endless dollars at a time.