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DataRails: Why Are Businesses Still Relying on Excel for Key Financial Processes?

Microsoft Excel’s limits as a tool for managing complex datasets have been exposed time and again – from the London Whale trading incident to recent struggles with accurately tracking covid-19 cases.

So why do so many businesses still turn to Excel to manage their most important financial processes? Didi Gurfinkel, CEO of the cloud-based financial reporting platform DataRails, takes a closer look at the phenomenon and argues that while Excel still has its value, businesses need to harness more advanced solution to manage highly complex financial processes: 

Didi Gurfinkel, CEO of DataRails
Didi Gurfinkel, CEO of DataRails

Financial bookkeeping has come a long way since the textile merchant Francesco di Marco Datini began compiling extensive records of his transactions in the 14th century.

Some 619 years would pass between 1366, the date of Datini’s earliest records, and 1985, when Microsoft launched the Excel spreadsheet. In the years since, businesses have harnessed Excel tools from pivot tables to Xlookup to input, analyse, integrate, and report a wide range of data.

But while Excel may have been a cutting-edge innovation in the Atari age, a great deal has changed in the past 36 years, and Excel’s shortcomings have become increasingly apparent. Limited in its ability to integrate all relevant data into one centralised database, Excel has created counterproductive silos and has shown itself vulnerable to error.

Size limits on Excel spreadsheets led UK officials to miss nearly 16,000 positive covid-19 cases. Copy-paste errors were partly responsible for the infamous London Whale incident, which triggered a staggering $6 billion in losses by JPMorgan.

Even still, finance chiefs are struggling to convince their teams to abandon their over-reliance on Excel, in large part because employees simply don’t know any way to track and generate business data. A 2019 survey by Forrester revealed that nearly half of companies still used spreadsheets for their auditing and controls.

That is beginning to change, however. For example, forecasters project that the cloud accounting software market will grow to nearly $3.75 billion by 2025, a 28% increase over the market size in 2019 – a trajectory that attests to the growing appetite for more advanced financial reporting solutions. The impetus behind this shift? The need for more accurate and efficient data analytics capabilities, the desire for a better allocation of finance teams’ time and energy toward less mundane, more complex tasks, and the imperative for a 360-degree view of the organisation’s key financial data, free of silos.

Additionally, artificial intelligence and automation are enabling faster, more efficient analyses than Excel. Unlike human professionals manually entering data into spreadsheets, automated solutions do not buckle under the strain of time or pressure, and their computing power for accurately tracking, aggregating, and presenting financial data is far greater than what Excel – or the fatigable, fallible human mind – can achieve. Accordingly, more and more organisations are embracing automated solutions as a critical way to reduce errors and save precious time, as a recent McKinsey analysis laid out.

In integrating new data analytics and financial reporting tools, company leaders must be mindful of barriers to change – not least their staffs’ longstanding preference for familiar programs like Excel. Fortunately, awareness of the power of automated solutions is gradually rising, and the need to usher in digital transformation and greater operational efficiency will also spur more organisations to adopt streamlined solutions that align with the needs of both the organisation and the broader market.

Businesses large and small can continue utilising Microsoft Excel for a broad array of tasks. But financial accounting and reporting are too important to be left to siloed, error-prone solutions. Artificial intelligence holds the key to a smarter approach. Just as Datini embraced what were then newfangled methods of bookkeeping, now is the time for businesses to tap into the power of today’s technology to make their operations more intelligent and boost the bottom line.

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