Using Excel in Finance: The Love/Hate Relationship

Excel is the world’s most popular spreadsheet, among both individuals and companies. Finance teams in particular rely on Excel for a variety of tasks, many considering it a vital accounting and finance tool. This is primarily due to its flexibility, availability, and, let’s be honest, because it has been ingrained in finance work practices for decades.

However, Excel also presents challenges, like complexity, inability to collaborate and it being error-prone. This dual sentiment towards Excel has resulted in what has become known as the finance “Love/Hate Relationship”.

Let’s dive deeper into the reasons underscoring this relationship, what finance teams should look out for when working with Excel and when should they consider complementary solutions.

Advantages of Using Excel

Finance teams love Excel. Here’s why:

• Versatility and flexibility - At its core, Excel is a versatile and flexible solution, and that’s the biggest benefit it offers to finance and treasury management. Excel's functionalities (see below) allow finance teams to perform any task they need, in a way that is customized to their liking. This includes financial modeling, budgeting, forecasting, data analysis and more.
• Built-in functionalities: Excel provides multiple functionalities that finance teams need for their roles, like formulas, pivot tables, charts and more. These can be created fairly simply, allowing for cash management and predictions.
• Robustness - Excel supports more than millions of lines of data. This means businesses, including global organizations, can easily manage all their needs inside.
• Direct accessibility to data - Excel allows finance teams to do what they love best - touching and feeling the data. They can slide and dice the numbers in multiple, versatile ways, to explore new possibilities and identify new solutions.
• Availability - Excel usage is so high simply because it’s included in every Microsoft Office license. This makes it accessible and available to finance teams everywhere, without having to look around for other solutions. In addition, its ubiquitous use means that finance professionals transitioning to new companies do not have to go through platform onboarding (though they will need training on the new team’s specific excel layout and formulas).
• Cost - For those already using Microsoft Office, there is no additional cost incurred. This, as we all know, makes it a finance-favorite

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Disadvantages of Using Excel

However, Excel also poses challenges for finance teams. For example:

• Error-prone - One of the most significant issues in Excel is the error-prone nature of manual data entry and formula setting. A simple mistake, like a misplaced decimal or an incorrect range in a formula, can result in monumental errors, affecting financial statements and strategic decisions. 
• Cost of a mistake - A solution that is error-prone should be considered in light of the cost of being misleading or misinformed about the cash position. The likelihood of errors when copying data manually is higher, which may result in poor decisions when managing cash. Being unable to pay salaries or make vendor payments, losing funds or "parking" them in low-return channels for too long are all caused by bad-decision making that come with a high price. In every company, the cost of error is different, but without full visibility, these errors are not only more likely to occur but also take longer to discover. 
• Complexity - Financial models in Excel are becoming more complex, with data being collected across tabs and formulas. This information maze makes the Excel difficult to navigate, audit, update, validate, track and version. Such uncertainty can lead to a lack of trust in the data, especially when significant decisions rely on these models.
• Time-consuming - Manually entering data in excel takes time. This could include adding bank statements from multiple bank accounts and often multiple banks, inputting information from suppliers, gathering information from multiple global entities in different currencies and more. The more complex the spreadsheet, the longer it takes. 
• Collaboration obstacles - Excel’s cannot be worked on together in real-time, making collaboration and version control a significant challenge. When decisions need to be made quickly, based on the most current data and from a variety of data sources, Excel's traditionally single-user focus can be a bottleneck.

For example, if you have 10 different departments, all with their own versions, CFOs are required to wade through the various versions to compile a total financial picture. Multiple versions of the same file make it difficult to track and explain the changes between the different versions.

• No real-time picture of data - Collaboration obstacles also make it challenging to obtain a real-time, reliable picture of the data and cash flow. Having to manually data from different Excel versions and accounts means that the data is only as updated as the last manual entry. This makes it difficult to make real-time decisions and slows down strategic decision-making as well.
• Takes time to master: New users can easily create basic spreadsheets and produce new charts and graphs. But if you need to use macros, pivot tables or complicated formulas, expect a very steep learning curve.
• No integrations or automations - Excel cannot be integrated with data from other departments or with external platforms to get insights and make decisions. This makes the work repetitive, error-prone and inconsistent

While Excel offers versatility in financial tasks, its limitations in handling complex data and collaboration can lead to inefficiencies and increased risk of errors

Excel Alternatives

Excel can be used by finance teams until the finance operation becomes complicated at a certain point in a company's lifecycle. At that point, automated treasury solutions either can help address Excel’s shortcomings or replace it: the potential errors, complexities, the need to collaborate among global local teams, the unnecessary time spent manually entering data, lack of real-time visibility, the complex onboarding to existing formulas and lack of integrations and automation.

An automated treasury or cash flow management tool provides visibility, increases capital efficiency and gives finance teams full control. With automated treasury management solutions, finance teams can automatically:

• Manage liquidity, invest excess cash, minimize debt, and eliminate unnecessary costs.
• Foresee cash needs, identify trends and anomalies, and be prepared for different scenarios.
• Get Al-driven cash insights and trends and eliminate the need for unnecessary, error- prone spreadsheets.

Automated tools are capable of covering their cost and more, by increasing ROI on existing cash, optimizing debt management, reducing errors and frauds and maximizing productivity. Learn more here.‍