Leveraging User Profile and Behaviour to Design Practical Spreadsheet Controls for the Finance Function

Recognizing that the use of spreadsheets within finance will likely not subside in the near future, this paper discusses a major barrier that is preventing more organizations from adopting enterprise spreadsheet management programs. But even without a corporate mandated effort to improve spreadsheet controls, finance functions can still take simple yet effective steps to start managing the risk of errors in key spreadsheets by strategically selecting controls that complement existing user practice Spreadsheet Usage Continues to Thrive in Finance. Spreadsheets are an indispensable tool for organizations today, particularly in finance. Due to their flexibility, computing power and widespread availability, spreadsheets are often the answer for finance functions that need to supplement their financial system(s) quickly and inexpensively. It is often easier, faster and more cost effective to create an analysis in Microsoft Excel or similar applications than to reconfigure an enterprise resource planning (“ERP”) system to perform the same task. In the last ten years, the heavy reliance on spreadsheets for financial reporting, budgeting, forecasting and planning purposes are consistently observed and echoed by researchers, scholars and business practitioners alike [Panko 1998, Rittweger 2010]. And there is little sign of this trend abating in the immediate future. In 2011, the Financial Executive Research Institute and Robert Half Management Resources jointly published Benchmarking the Finance Function (Thompson 2010). Of the 207 public and private sector senior executives surveyed for this benchmarking study, more than 60% of finance functions: • Still relies on Excel for budgeting and planning • Still relies on Excel for long term planning • Do not use an account reconciliation tool or system to reconcile accounts. As manual account reconciliations are mostly completed in Excel, the author deduces that these organizations continue to use spreadsheets to reconcile accounts. While it might not be possible or desirable to phase out all spreadsheets, organizations can still enjoy the benefits of such a powerful and versatile application by recognizing and mitigating the risks associated with a poorly controlled spreadsheet environment. The intent behind a spreadsheet management program is to treat important spreadsheets as stand-alone applications and apply the same due diligence as other enterprise applications during development and in production. In other words, verifying that business critical spreadsheets have built-in controls to validate input data, ensure logic accuracy, and manage changes to the spreadsheet’s infrastructure. While the Risks are Acknowledged, Many Organizations Have Not Implemented Formal Spreadsheet Management Programs.