Is Excel Reporting A Wise Choice?

That depends on where the data comes from.

I recently saw a comment by Randall Bolten to a Proformative webinar on Excel based reporting. Mr. Randall is author of the book “Painting with Numbers” which the author describes as “Presenting Financials and Other Numbers so People will Understand You.”

Seeing and understanding data is the outcome of effective communication of financial results to company management and users of financial statements (banks, investors, shareholders, etc.). These financial results can represent management reports of past performance, budget and forecast data, financial statements, the organization’s financial strategic and operational plan and more.

Microsoft Excel is the most widely used software application in the workplace. You would be hard pressed to find a single person using a computer at work without at least occasionally opening an Excel workbook and using it for a variety of applications. In accounting and finance, Excel is used daily and can be found open on the computer desktop for as long as the user is logged in.

Financial reporting with Excel makes perfect sense as long as the user fully understands the benefits and limitations, and especially the pitfalls and risks involved, as we are about to discover here.

It still amazes me to see how companies, even large ones, depend on Excel for consolidations and compilations of financial statements, despite the fact that their ERP software or accounting applications are usually perfectly capable of producing such statements with the proper setup.

The main risk in using a spreadsheet in the preparation of corporate financial statements arises from the use of home-grown spreadsheets with user-defined formulas, functions, macros, and links, all of which can include errors and omissions, can be easily overwritten or manipulated, erased or lost. To that add the typical lack of periodic review of these spreadsheets for accuracy and completeness, and the risk for material errors in the financial statements increases considerably.

The same is true for corporate budget preparation and periodic re-forecasting done in Excel. This is still common practice in many organizations and even well known, dedicated database based planning and budgeting solutions use a “spreadsheet like” approach having some of the pitfalls listed above, reasoning that users are already familiar with the Excel interface and use of its formulas, functions, and links.

As we have seen in several of the blog entries on this site, this is a very dangerous and undesirable practice: Are You Still Consolidating Financial Statements in a Spreadsheet? and Forecasting a Balance Sheet in a Spreadsheet World.

There is, however, a set of compelling reasons why Excel can (and under the right conditions should) be used for presentations of financial results and other reporting. The principal example is when the financial data that needs to be communicated to users of these reports originates in a much more robust environment and is directly linked to the data source.

In the case of planning and budgeting applications, if Excel is only used for graphic and tabular presentation of data, without any significant formulas, functions, worksheet links and other user programming, there is a compelling reason to use this tool, for its rich set of formatting and graphical presentation options, and the robust and consistent data links established between the data source (e.g., Planning and Budgeting Software) and Excel.

A good example of using Excel to create presentation quality reports and analysis is Analytics Maestro from Centage Corporation. I have covered this application earlier in this blog: Accounting and Business Data Come to Life. This is a perfect situation where Excel does not directly participate in the creation of data through use of formulas, functions or any other programming. It merely is the recipient of data from Budget Maestro where all current and historical accounting data plus all budget versions reside. Through a seamless interface with Excel, raw data is completely and accurately transferred where Analytics Maestro Excel add-in takes over and displays it in the chosen format and includes the exact content needed for the particular presentation.

An application such as Analytics Maestro considerably reduces the risk of introducing material errors in reports. All presentation reports are as accurate as the raw data received from the actual accounting or ERP software and the data from the planning and budgeting solution. Since a link is directly established between these applications, there is no manual data entry required or any user interaction, hence the accuracy, completeness, and error-free data transferred into Analytics Maestro.

Finally, changes to the source data (e.g., revision of budget data) will automatically update the information displayed in Analytics Maestro. Here again, no formulas, functions or links ever need to be created or updated in Excel. You get the outstanding display features of Excel with no risk to the integrity or accuracy of the reported information.

With this level of formatting and presentation capability, reporting and analysis with Excel becomes a sensible choice for users in many areas of the enterprise. Conversely, any use of Excel for planning and budget modeling or preparation of consolidated financial statements remains a risky endeavor and should be avoided.

Is Excel Reporting A Wise Choice?