Sorry, Your Spreadsheet Has Errors (Almost 90% Do)

 

Various studies report that nearly 9 out of 10 spreadsheets (88%) contain errors. A majority of these errors were from human error (and could have been avoided). This article lists famous examples of spreadsheet blunders and how companies can avoid spreadsheet error in the future.

You may want to pause before hitting “send” on your next Excel masterpiece: Various studies over the past few years report that 88 percent of all spreadsheets have "significant" errors in them. Even the most carefully crafted spreadsheets contain errors in 1 percent or more of all formula cells. A majority of errors reported were caused by human error—meaning they could have been completely avoidable mistakes.

Big Spreadsheet Bloopers

Spreadsheet software provides an easy-to-use data entry platform for students and professionals, particularly in the marketing, sales, business, and finance fields. However, there are equal opportunities to overtype incorrect numbers or formulas, or incorrectly factor in numbers.

For families and small businesses, miscalculations may only have a minor effect on balance sheets, but these errors can have a much greater financial and professional impact for larger organizations. Even small spreadsheet mistakes can cost companies billions of dollars or ruin a professional’s career and reputation.

Several cases of spreadsheet errors over the past few years have added fuel to this topic and increased pressure for organizational action. Researchers discovered a major math error in a 2010 study by Harvard economists Carmen Reinhart and Kenneth Rogoff on the sustainability of debt, poking holes in their popular economic theory based on spreadsheet calculations. This resulted in widely reported speculation that their theory, quoted by experts in several different publications, was incorrect.

JPMorgan Chase lost more than $6 billion in its “London Whale” incident, in part due to Excel spreadsheet errors (including alleged copying and pasting of incorrect information from multiple spreadsheets). In a sad twist of fate, the British bank  Barclays sent an offer to purchase another firm in 2008 that hid—instead of deleted—nearly 200 spreadsheet cells, resulting in unnecessary losses.

How to Avoid Spreadsheet Errors

Like most programs, using spreadsheet software like Microsoft Excel is a manual process. That means your calculations are always susceptible to human error, such as keying in the wrong numbers or copying over the wrong amounts.

Unfortunately, every formula is unique and has a specific task, there isn’t an automated tool to check for spreadsheet errors. Still, there are some steps you can take to prevent most errors from happening.

Some industries are proactively avoiding spreadsheet miscalculations by creating industry-wide standards of financial modeling. On a smaller level, organizations can skirt many major errors by developing an organization-wide, comprehensive policy for spreadsheet development. And, a good practice for any business is to include a final peer review or “scrub” of all spreadsheets before including them in analysis.

According to experts, many mistakes can be spotted early visually or through double-checking formulas.

Has your organization put a process in place to avoid spreadsheet errors?

Reference: https://www.forbes.com/sites/salesforce/2014/09/13/sorry-spreadsheet-errors/?sh=21691c1a56ab