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8 limitations of Excel Spreadsheet for Planning, Budgeting and Forecasting (FP&A) activities




According to the 2017 survey with CFO Research, 55% use spreadsheets exchanged via email. as their primary tool/system for Budgeting, Planning and Forecasting and information and only 6% of the users are “very satisfied” with Excel as the tool.


Spreadsheets are a good and cost-effective tool for small companies, but it is unable to scale with organizational growth. When a company grows, spreadsheets grow, and it gets more complex. With growth of complexity, it creates more opportunities for mistakes and can bring disastrous results to the company.


According to Oracle, almost 90 percent of all spreadsheets have errors. Even the most carefully developed, tried, and tested spreadsheets have errors in 1 percent of all formula cells. Despite the known risks of using spreadsheets, it is still a common practice for finance departments and high-level management to use it as their main tool. In this article, we will uncover the limitations and why CFOs should not only rely solely on Excel Spreadsheet for FP&A activities.

  1. Extremely difficult to plan for different scenarios/What-if scenarios Data is important for all FP&A activities and building a forecast/financial model will require data logic and for data to be processed in multiple dimensions however Excel is only a 2-dimension model. Excel limits your ability to incorporate multiple data at the same time with different assumptions and hypothetical scenarios to for comparison and analysis to make informed decisions. Excel is unable to handle the considerable amount of variables with its X-Y model and thus unable to provide accurate/reliable data and forecasts for decision-making.

  2. Painful and time-consuming FP&A activities Budgeting/planning decisions based on forecasts and what-if scenarios on spreadsheet is time-consuming and resource intensive. As mentioned in the previous paragraphs, Excel is a 2 dimension model and is unable to process data in multiple dimensions required for forecasts. Most companies are unable to utilize Excel for frequent forecasts due to the sheer complexity of the company or work around Excel by reducing the amount of variables which skews the forecasts. Hence CFOs are forced into more reactive decision-making which can result in missing out on opportunities and fail to get a competitive advantage.

  3. Difficult to quickly adjust plans and budgets based on real-time events in face of an unexpected event, plan and budgets have to be re-adjusted from top-to-bottom and another long spreadsheet budgeting, planning cycle is required. Excel spreadsheet does not provide CFOs with agility and flexibility to grasp the situation, make quick data-driven adjustments.

  4. Collaboration is challenging In a budgeting and planning process, the more collaborators you include especially from different departments at different levels provides more strategic value and this is difficult to accomplish with Excel spreadsheet based FP&A and BPF. Excel Spreadsheet was designed as an individual productivity tool and hence the nature of excel was not for mass collaboration. In the older versions of Excel, it lacks features for real-time and mass collaboration. Editing of the document can be done only by 1 user at a time , its disconnected data flow, manual offline data exchange via email and lack of change tracking is a big obstacle for collaboration. This obstacle creates inefficiencies, unproductivity that take up additional time and resources in an already tight schedule but also allows for opportunities to make minor undetected mistakes that when cumulated over time can bring about disastrous effects on the company. Although multi-user features were introduced in the newer versions however, collaboration is still difficult as the data are unconnected on different platforms and treated as separate individual data sets. Any user that utilizes or downloads data from a single spreadsheet, it becomes a totally independent set of data which can produce totally different results and identifying its difference or understanding its unrecorded assumptions can be tough.

  5. Longer financial cycles Utilizing spreadsheets for financial activities is labor-intensive and one of the biggest repercussion having a longer financial cycle is its impact of budgeting. According to the American Productivity & Quality Centre, 55% of company's budgets assumptions are already useless just 3 months after the budget year begins. With the long budgeting cycle, companies can be working off budgets and financial plans that are obsolete almost as soon as they are completed.

  6. Lack of Documentation Excel spreadsheet models are notorious for lack of documentation of their logic especially when it starts to grow. The bigger the model, the more difficult it is for new personnel to understand it due to the lack of documentation of assumption and loss of information as the spreadsheet moves from one user to another. As time goes by, many Excel forecasting models remain untouched for fear of breaking them however, this also prevents the company from utilizing better forecasting models that brings better accuracy

  7. Lack of Workflow Submissions, approvals of forecasts and keeping an eye on the work progress can be a major issue as the amount of contributors increase. Excel has no in-built workflow feature that allows users to get bird's eye view of the different activities work that was delegated, its progress and bottlenecks. Submission and approvals must be controlled and approved manually, additional cost might be incurred to purchase a workflow software to keep track of the progress.

  8. Lack of audit trail Most formulas within the Excel spreadsheet provide no immediate audit trail of each aggregated figures and manually tracking of each figure on a regular basis is extremely time-consuming. Excel also lacks the feature to track and monitor changes which is important for data integrity especially in detecting ill-intentioned changes by internal personnel.






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