Compliance: BPM and the evolving Spreadsheet

Twenty-five years ago the introduction of the spreadsheet defined the term “killer application“.  Since then, spreadsheets have become the centerpiece of financial reporting, budgeting, planning, and forecasting.  78% of companies still rely on the spreadsheet as their main tool for financial reporting.  Many companies are basically run on Excel.

But Compliance, particularly Sarbanes-Oxley, is causing companies to rethink spreadsheets.   Problems with traditional spreadsheets include:

1. Spreadsheets can’t capture real-time data
2. They don’t scale well and lack good tools for collaboration between many users.
3. Consolidation or “rolling up” of multiple spreadsheets is often difficult and time-consuming
4. Lack of auditing and revision control. 
• Who changed what and when?
5. Error prone.  As many as 90% of spreadsheets might have errors.
• Interface Errors (for example, incorrect links to other spreadsheets)
• Logic Errors
• User/Human Error (for example, accidently changing data for formulas, or incorrect input)
6. Not Time-efficient.  68% of large companies take 2-3 months to complete their annual budget and 25% of that time is related to creating and processing spreadsheets.
7. Process controls are lacking.  No real concept of review and approval of spreadsheet design or data.
8. Spreadsheets are often not treated as business records

Simplicity is the main reason for the continued success of the spreadsheet.  Another reason that they’ve succeeded is the lack of a need for rigorous controls.  Spreadsheets have empowered financial groups, bypassing the control of IT.

But Sarbanes-Oxley is demanding more rigorous control over handling of spreadsheets.  Section 404 requires that internal controls and procedures be established in managing financial reporting and also for accessing the effectiveness of those controls.

Policies and procedures for auditing changes are slowly being adopted to comply with regulations.  The newly released Microsoft Excel 2007 was designed to address some of the compliance issues.

But what also is happening is that BPM vendors see that while they have the tools and processes needed to address many of the deficiencies of spreadsheets, their tools to-date have not been widely adopted. 

In the short term, BPM vendors are fighting back by embracing and integrating spreadsheet functionality as part of their solutions.  And, more often than not, BPM vendors have selected to integrate tightly with Excel.  But longer-term, vendors continue to try to promote the more robust capabilities of BPM.  Key among those capabilities is the ability to create a single auditable and accurate source of financial information.  The obstacle for BPM vendors contiunues to be the need to capture the same kind of simplicity and intutiveness in usability that has made spreadsheets so successful.