This article is part of an Essential Guide, our editor-selected collection of our best articles, videos and other content on this topic. Explore more in this guide:
1. - Problems with using Excel for finance: Read more in this section
- Excel not a proper replacement for financial management software
- Excel finance use just barely viable with spreadsheet governance tools
- Top perils of corporate finance Excel use
Explore other sections in this guide:
Microsoft Excel is a fantastic self-service discovery tool for ad-hoc data. However, its key weakness is that there are currently few safeguards for data governance, data processing or data quality. This makes Excel a poor tool for organizations that need to share data or conduct complex analysis where errors can easily be entered through a single point of failure.
There are typically three key reasons to move away from Excel:
- The need for multiple stakeholders to directly manage the budgeting process. To maintain a log of changes and ensure that there is governance in the budgeting process, companies should move away from Excel.
- The need for complex budgeting processes. For instance, if budgeting involves algorithmic or statistical risk factors, companies should move to a more robust budgeting tool that has integrated business intelligence or predictive analytic capabilities.
- Budgeting requires significant nonfinancial explanation or analysis. If budgeting requires a high level of documentation from either a governance or compliance perspective, it may be time to move to a budgeting system that has more strategic management or GRC (governance, risk management and compliance) support to manage text and other backing information that will clarify the budget above and beyond Excel's capabilities.
About the author:
Hyoun Park is principal analyst at Nucleus Research Inc., overseeing primary investigative research on analytics, big data, business analytics, social software and enterprise mobility. Follow him on Twitter @hyounpark and read his research at www.nucleusresearch.com.
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