10 of the most common spreadsheet risks – and how to avoid them
Do you use spreadsheets to help you run your business? If so, discover the 10 most common spreadsheet risks – and how to avoid them.
Spreadsheets are often overlooked and repeatedly undervalued. You run your business from them; your financial information, confidential company agreements, customer details, amongst many others, are all stored on them.
However, it’s only when things go drastically wrong that people realise how much peril they’d inadvertently placed their business in through poor spreadsheet management.
We rely on spreadsheets – but are you taking these 10 risks?
Spreadsheets are practically a staple in every office and have been for decades. Growing with our businesses, they have evolved alongside emerging technologies.
What began as a fairly simple way to keep records has now transformed into a tool for complex analysis and a way of formatting data clearly for presentation.
But, while this evolution has greatly improved business efficiency, the increased capabilities means more complex systems, which creates a higher risk of errors.
In this article, we will cover some of the most common spreadsheet risks and what you can do to protect your business from them.
1) Not backing up data
Confidential and business critical information is often stored within your spreadsheets. Have you put much thought into what would happen if this vital data were lost? Have you considered the implication it would have on your business?
To get around this worry, make sure you have a backup strategy in place. Users need to regularly save and backup their sheets into a secondary point, this could also be supported by a tertiary backup area to be extra safe.
2) Leaving systems open ended
If software and data is vital to the operations of your company, you need to limit who is capable of accessing and editing it.
If every employee is given access rights to edit sheets, there is an increased risk of untrained users making accidental mistakes while analysing the data. To prevent this, implement a Closed Computer System. Essentially, this will limit which users can access the spreadsheets and what edits they are capable of making.
3) Not checking the first draft
You might think that this point is a given. But ensuring sheets have been correctly built in the first place is one of the most effective ways to reduce the risks a spreadsheet poses.
To overcome this risk, you could put in place a peer evaluation system, ensuring the data is checked over before it gets rolled out across your whole organisation.
4) Not preventing spreadsheet fraud
It’s essential you protect your business from every eventuality. And, unfortunately, fraud is a risk that too many business owners don’t actively protect themselves from. Instead they hope that the goodwill and common sense of their employees will cover them.
Spreadsheet fraud has led to too many businesses closing. To avoid this happening to you, make sure you educate end users and employees of the signs of potentially fraudulent activities.
5) Not setting creation guidelines
Clear rules need to be defined for users about the expectations for how spreadsheets should be built. Without a common rulebook, you’re more likely to be plagued by avoidable (but expensive) errors.
When every spreadsheet is created using the same process, you’ll develop a consistency that will ensure your spreadsheets are all of an equal standard and are easy for everyone in your company to understand and use.
To implement this, you need to create a set of rules around styling, how and who can access content, and who has accountability for different spreadsheets and their functioning.
6) Not educating employees
Too often employees with inadequate training are given the task of creating spreadsheets. Failing to properly train employees will create a situation where inadequate spreadsheets are created with improper formulas and poor referencing.
These substandard spreadsheets can lead to incorrect conclusions being drawn from data – and the wrong decisions made as a result. A mistake that can be extremely costly to your business.
By training and educating employees, you’ll ensure they have the skills to create spreadsheets that adhere to your company guidelines and work properly.
7) Poor headings and labelling
If the headings on rows and columns are not properly labelled, there is an increased risk of users interpreting the sheets inaccurately.
With clear, simple headers on the rows and columns, you’ll minimise this risk. It’s not wise, for example, to use random letter and number identifiers for headers because it’s easier for users to misread and remember them incorrectly.
8) Overly complex formulas
With the capabilities of spreadsheets to fulfil huge calculations, it is often possible to solve an issue in several different ways.
However, if overly complex formulas are used to create a spreadsheet, it makes updating the sheet at a later date more difficult. It also makes tracking the functions of each calculation trickier.
To help resolve this, whenever you can, have the formulas divided into clear steps. This provides a bit of clarity, which helps to highlight inconsistencies when reviewing work.
10) Recycling spreadsheets
It’s fairly common for spreadsheets to have multiple iterations throughout their use. Linking back to the earlier point around education, it’s not uncommon for untrained users (and sometimes trained users) to copy and paste data.
Unfortunately, transferring data by cutting and pasting creates issues, and spreadsheets won’t always function as they were designed to. Moving data like this causes formulas to get overwritten and changed, and links can be destroyed.
What first appears to be a great way to save time can, in the end, turn into a marathon of a task when trying to resolve the issues it has caused.
Make sure your spreadsheets help (not hinder) your business
While spreadsheets are central tools to most small businesses, it’s vital that every business owner is aware that they have the potential to cause your business serious damage too.
Poorly handled data can create multiple issues, ranging from bad decision making to, in the extreme, law breaking. Now you’re aware of the risks, you can hopefully avoid the 10 most common mistakes and instead create a well-designed spreadsheet management system.
Photo by BBH Singapore