More Costly Spreadsheet Errors | September 7, 2007
by Jeb Boniakowski
We talk a lot about how spreadsheet processes are error-prone, but in general, we're fairly abstract about it. Specific examples, however, crop up in the news all the time. There were several in the month of August. Here's one example:
Its second accounting error in as many quarters will result in a $3.4 million restatement at Symmetricom Inc. that will push its third quarter into the red....The company said that error was related to accounting for outsourced labor related to installation work and resulted from reliance on a manually compiled spreadsheet that was not accurately completed. [emphasis mine]
When we talk about spreadsheet-based processes being prone to expensive errors, we aren't necessarily talking about things like flaws in design or testing, that will affect virtually any system and are generally a function of budget and schedule, though those are of course substantial risks. What we think is potentially more dangerous is the fact that complex spreadsheet-based reporting processes almost always end up being boiled down to a lengthy series of steps an individual has to do on a weekly/monthly/quarterly basis. People are generally very good at establishing these processes and ensuring that they are correct, but they are not generally well-suited to repeating them flawlessly. It's just not the type of work most people are expert at, and given the nature of spreadsheets, it is generally very difficult to tell that anything has gone wrong.
We feel the best way to deal with these issues is to automate where possible, and then scrupulously check results, which is much easier with automation. Set up a system correctly once, then ensure that the system performs the same process to your data every time. If the system can produce the required output quickly and gives access to intermediate calculations, validity tests and sanity checks can be easily run.
