Enterprise Excel >
Is Excel Budgeting a Mistake?
Excel's critics say that Excel is
fundamentally unsuited for
budgeting, forecasting, and other activities that involve
collaboration or consolidation. Are they correct?
by Charley Kyd
One of Excel's most widely quoted critics is Robert D. Kugel, Senior
Vice President and Research Director for
The nature of Kugel's rhetoric is fairly consistent. To illustrate
his typical criticism, in June, 2004,
Kugel explained in BPM Magazine why Excel users are using the wrong
tool. "What, then, drives process complexity?", he asked. "In a word --
"Although spreadsheets are great for ad hoc analysis that involves only
one or a few people, they're fundamentally unsuited for enterprisewide
collaborative efforts such as budgeting and planning at the level of
detail corporations require.
"The spreadsheet's defects are behind the difficulties organizations
have with the process. We therefore advise organizations to eliminate
spreadsheets if they want to budget and plan more effectively."
Limit the Use of Excel? Others Agree
Others have jumped on Kugel's bandwagon. To illustrate, the tone of
a recent press release from Adaptive Planning reveals that the
company is shocked, truly shocked to learn from an ongoing survey that
most business still use Excel for budgeting.
"One of the most revealing findings," their press release declared,
"was that the technologies that finance teams are using are woefully out
"Across all companies, 78% of respondents are still using
spreadsheets as their primary budgeting and forecasting tool. This
phenomenon is not limited to small or midsized companies—68% of large
companies rely primarily upon spreadsheets for budgeting and
The article quoted the president of a BPM consulting company, who
offered his assessment of the survey. "These results," he said, "clearly
highlight that most finance departments have not embraced best practice
technologies and processes, and as a result are holding back their
As you might expect, Adaptive Planning sells a product that competes
with Excel for planning, and
their web site links to a Ventana whitepaper that supports their
Kugel's words have influenced others, as well. Recently, a senior editor of a
business software magazine wrote me that, "our usual stance is that
Excel is best for analysis and self-contained business unit reporting,
but isn't appropriate for corporate reporting, budgeting, analytics,
With these quotes in mind, I've recently studied many of Kugel's
articles about the use of Excel in enterprise applications. My original
thought was to write a detailed response to him and other such critics
But now, after more reading, I must admit that I agree with his
Mind you, I don't agree with his overstated rhetoric. But behind the
rhetoric, Kugel makes valid points about the way Excel normally is used
in business. For nearly 20 years I've helped consulting clients to
cure similar problems.
The Real Problem: How Excel Is Used
In his article
When Good Spreadsheets Go Bad, Kugel finally makes his thinking
clear. He writes, "Ventana Research strongly advises companies to
eliminate standalone spreadsheets in all collaborative or repetitive
enterprise-wide finance functions such as budgeting and planning."
The key word in that sentence is standalone. That word is easy
to miss, but it's crucial to finding a solution to the problems he describes.
"We also advise companies," Kugel continued, "to limit their use in
cases where security, control, and auditability are critical. The
importance of these issues has increased with the passage of the
Sarbanes-Oxley Act and subsequent focus on establishing and maintaining
robust financial controls."
Here, Kugel continues his valid point: Companies should limit their
use of standalone spreadsheets for enterprise applications,
particularly when companies are affected by the Sarbanes-Oxley Act.
So what's the alternative to standalone spreadsheets?
"An alternative to standalone spreadsheets is what we call the
Enterprise Spreadsheet. This software bolts a spreadsheet (usually
Microsoft Excel) to a centralized computing system. It leverages all of
the training and experience individuals have accumulated over the years,
while eliminating the difficulty of rolling up information from a set of
spreadsheets, ensuring the synchronization of information, and enforcing
all forms of security around the information and process."
Unfortunately, Kugel omits "standalone" from most of his
articles that criticize spreadsheets...much to the delight of companies
that compete with Excel in budgeting, planning, and other enterprise
What type of software "bolts a spreadsheet....to a centralized
computing system"? Many products do. Unfortunately for Excel users, most
of these write (or "print") values back to Excel, continuing
the bad practice -- storing values in cells -- that Kugel
In my experience, the best way to eliminate the spreadsheet problems
that Kugel describes is to use an Excel BI (Business Intelligence)
as illustrated here.
The key characteristic of this approach is that Excel no longer contains raw data. Instead,
users rely on formulas to live-link the cells in their worksheets to
multidimensional data stored either locally or on a server.
As Kugel demands, this arrangement offers full synchronization and
security. Password security can be specified down to a single value in a cube. And spreadsheets are synchronized easily, because
they're refreshed with up-to-the-second data whenever they're
These types of systems can have two other delightful characteristics. First, they're
quite inexpensive, as these things go. Second, they're designed to be administered by
knowledgeable users, not by IT departments. So small companies can afford to use the same
Excel BI systems that giant companies use.
Are Excel users making a mistake when they budget in Excel? Not at
all. Are there ways to make their task a whole lot easier? You bet.
Excel BI systems are the way to go.