Forget things that go bump in the night. For financial professionals, it’s reporting errors that are the stuff of nightmares. You carefully compile data and crunch formulas, only to find a typo has thrown your findings off. Or a department head has tweaked a formula in one of the team’s many spreadsheets, radically shifting the reports. Or—just as bad—you spend hours double- and triple-checking everything, and all that wasted time means you give short shrift to the actual analysis.
1. Put the right security features in place
When most people hear the term “data security,” they think cybercrime and nefarious hacking, but the truth is your financial reports are vulnerable to people you might not realize: employees. When budget managers tweak a formula—whether by accident or because their underlying assumptions have changed—it can skew reporting downstream. When an FP&A clerk makes an honest typo and throws the findings off, figuring out which cell has been changed can be incredibly time-consuming.
And, if spreadsheets that lack security features are ever shared with investors or the broader community, all of the company’s underlying information can also be laid bare. One corporation was even forced to deliver its annual profit briefing a day early because an Excel spreadsheet shared with research analysts wasn’t properly secure, so analysts were able to manipulate the details embedded in the template and discern financial information ahead of schedule.
Putting the right precautions in place can be as simple as selecting the right financial dashboard that offers security features to limit access and track any modifications.
2. Don’t embed assumptions in formulas
Assumptions are one of the most frequently edited item in a calculation, so when they’re embedded in individual formulas, you’re setting your data up for endless revising. To dramatically reduce the odds of a reporting error, put that assumption into its own cell and then have individual formulas pull from that location. Rather than updating every formula each time the assumption shifts, the FP&A team will have to make just one tweak.
3. Embrace visual analytics
In 1973, English statistician Francis Anscombe published the paper Graphs in Statistical Analysis to stress the importance of data visualization. To show how essential graphs are to statistical analysis, he created four sets of data and X and Y coordinates. Then, he graphed these data sets into four scatterplot charts. In looking at the raw data, the four groups seem nearly identical; it’s hard to discern any sort of difference. But the graphs make it instantly easier to spot the outliers and see where there might be something amiss with the data. More than 40 years later, Anscombe’s point still stands: Visualization lets you catch potential errors much more quickly and thoroughly than looking at raw numbers alone. And a financial dashboard that makes visual analytics easy and seamless means the finance team is more likely to tap into this powerful error-killing tool.
4. Create a common language
Multiple team members discussing data from multiple software programs and spreadsheets can be confusing enough. But when one department defines terms slightly differently than another, reporting errors are almost guaranteed. To nip confusion in the bud, pull together team members to create a defined and consistent naming convention. Take the time to discuss why those conventions are so important—and the costly errors they can help prevent. If people understand the reasoning behind the change, adoption will typically be speedier and more widespread.
5. Centralize the data
Finance leaders seek a single source of truth for a reason: When companies have data that’s updated in real time for all users, it means less iteration, fewer update delays, and more veracity in the data. In other words, fewer reporting errors rearing their ugly heads. Take, for example, the accuracy nightmare that is Excel: Nearly 90% of spreadsheets contain an error, research has shown. But the truth is, Excel isn’t the only issue for many organizations. Many small businesses are juggling two or three software programs, while mid-level companies might juggle four to seven. At enterprise organizations, that number can easily be double digits. Using a static solution, like Excel, to try to marry those myriad programs creates a rich breeding ground for reporting errors. Instead, consider a cloud-based financial dashboard that can integrate data into one centralized source.
Reporting errors can be frustrating: crush one, only to find two more popping up elsewhere in the report. But if your finance team is spending all of its time rooting out individual errors, that means it has less time to dig into the analysis and reveal the story behind the data. Instead of targeting individual errors, it’s time to think holistically and adopt straightforward solutions that will prevent reporting errors before they even start.
Our CFO Indicator Q3 2017 survey explores CFOs’ confidence relative to data and technology, as well as their progress in moving toward a “single source of truth” (single source of financial and operational data). Results reveal that Finance has successfully cleared what we believe to be one of the most significant hurdles—their hesitancy to store data in the cloud. Read our other CFO Indicator reports here.