Business Automation and Software Blog

Business Process Improvement: 5 Major Pitfalls of Spreadsheets

Posted by Robert Baran on Tue, Aug 30, 2011 @ 05:38 PM

Spreadsheets are an amazing tool that are simple to use and readily accessible.

They can be used effectively for modeling, analysis, building lists, scenario planning and complex calculations.  However, companies will often use spreadsheets to duplicate tasks that are already built into Enterprise Resource Planning (ERP) systems.

In a recent survey, 17% of small to midsize companies had yet to take the plunge to an ERP software system.  What do they use to run their businesses? 57% said they still use spreadsheets to run their business.  However, using spreadsheets to run a business can lead you to the following pitfalls:

  1. Spreadsheets do not offer an auditable system.Spreadsheets are considered an “undocumented application” because the formulas are so easily edited by the user.  If all of your financial data is recorded using spreadsheets, you would have a very difficult time substantiating claims using only a spreadsheet.
  2. It’s really easy to delete or amend data. Research recently conducted found that only one in every five spreadsheets are error-free and will give you correct results.  They offer so much flexibility that calculation mistakes are incredible easy to make.
  3. They lack collaboration. We’ve all had three versions of the same spreadsheet floating around in the same organization.  This is troublesome when you are in need of actionable financial data.  How can you know which one is the most accurate and up to date?  Oftentimes, they all have pieces of correct data but not the complete picture.
  4. They offer only limited reporting. Spreadsheets provide graphing and some reporting but it is limited to the fields that the spreadsheet designer elected to include.  What if you need a PO report by date and they have only included PO numbers?  Most companies need a lot more flexibility in their reporting.
  5. Security is very low. Spreadsheets are easily transportable and offer very limited security.  Financial data deserves more protection than that.  You never want that data to get into the wrong hands.

ERP systems allow collaboration, high and customizable security, a trustworthy audit trail and limitless reporting without any of the drawbacks that spreadsheets can create.  Of companies that did take the plunge into ERP, they saw the following results about nine-months after their “Go-Live” date:

  • 21% saw a reduction in operating cost
  • 17% reduction in inventory
  • 19% reduction in administrative cost

If you’ve outgrown spreadsheets, download our complimentary whitepaper: Ten Signs You Need a New Solution.

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*Statistics adapted from

Topics: business process automation, ERP Software, business management software, organizational efficiency