The Spreadsheet Trap: How Outdated Tools Are Undermining Financial Efficiency

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The fintech industry is now worth approximately $226.76 billion. Despite every tool of the trade, finance teams still choose spreadsheets. That’s why the finance function stands at a critical juncture. The convergence of advanced fintech, meshing with traditional practices, has created this exact moment…ripe for transformation.

Yet, even with modern tools specifically designed to streamline financial processes (and make your life easier), many organizations continue to rely on outdated methods.

Chief among them is the ubiquitous Excel spreadsheet—the program we love and hate.

In fact, among C-Suite positions, 88% of CFOs and nearly 100% of COOs and VPs of Finance use spreadsheets for budgeting and forecasting. For firms under 250 employees, spreadsheet use was at an all-time high of 90%.

While Excel and similar tools have served finance professionals for decades, their limitations in modern spend management have reached their max.

In this article, we examine the state of spend management and the challenges faced when relying on old technology.

Fintech and Digital Transformation in 2024

PayEm conducted a comprehensive survey with 270 finance professionals across diverse roles, industries, and organization sizes to understand better the current landscape of spend management and modern financial technology.

The findings paint a picture of a sector on the brink of change but still largely tethered to traditional tools. Despite the increasing accessibility of automation and AI (which promise to revolutionize finance), the heavy reliance on manual jobs and clunky spreadsheets reveals a significant gap between potential and practice.

Our recent survey demonstrated this overreliance. 86% of all respondents still use spreadsheets, even when they have better tools, like ERP systems and dedicated software solutions like Adaptive Insights and Anaplan.

While we all understand the convenience of a spreadsheet (especially if it's one you’ve built and own), the drawbacks of holding onto these tools far outweigh the rewards of letting them go. Here are a few reasons why it’s time to say a slow goodbye to spreadsheets…

Saying Goodbye to Spreadsheets

Reason #1) Humans Make Mistakes

We are not robots, and that’s okay. That’s why we build them. Humans make mistakes, and spreadsheets require substantial manual input, making them prone to human error.

We’ve all seen it, too. Simple mistakes in data entry can snowball in finance. Minor issues in formula configuration can lead to significant inaccuracies in budgeting and forecasting, which will affect financial planning and decision-making further down the road.

As finance functions grow more complex, the risks of errors increase, potentially leading to more costly mistakes. These problems are symptomatic of an over-reliance on pervasive manual processes in the sector.

Reason #2) Scalability Issues

As an organization grows, the volume and complexity of your financial data will increase. This is where spreadsheets start to panic. These simple tools are not designed to manage large datasets efficiently, leading to slower performance and more difficulty handling comprehensive financial information.

This lack of scalability makes it challenging for growing companies to maintain accurate and up-to-date financial records while focusing on strategy and expansion.

Reason #3) Zero Real-Time Integrations

Regarding real-time integrations, spreadsheets are as stagnant as a swamp in August. These tools do not easily integrate with real-time data sources or modern platforms, resulting in an outdated transfer of data and preventing finance teams from making timely adjustments and accurate financial forecasts.

In an environment where real-time data is crucial for decision-making, static spreadsheets will leave organizations lagging behind.

Reason #4) Limited Collaborations

Spreadsheets, particularly those shared via email, typically create version control issues. When multiple users work on different versions of the same document, inconsistencies happen, and data silos emerge, hindering effective collaboration.

This issue is only exacerbated in larger companies where teams are distributed across various locations.

What Have We Learned?

The continued dominance of spreadsheets suggests a significant gap in the awareness and adoption of more efficient financial tools. If organizations continue using outdated spreadsheets, a tremendous amount of actionable, valuable data is left on the table. This is the type of information advanced tools need to drive business growth.

Additionally, manual systems extend beyond budgeting and forecasting. A striking 76% of respondents still rely on human reviews and approvals in risk management, highlighting resistance to adopting automated solutions that could enhance efficiency and accuracy.

This overreliance on traditional tools is inefficient and hinders finance professionals' ability to make more timely, data-driven decisions.

Summing it Up

The finance industry is at a crossroads. While spreadsheets like Excel have been indispensable for decades, their limitations are increasingly incompatible with the demands of modern spend management. Over 3.5 billion people will use fintech for payments by 2024 and about 4.8 million by 2028.

So, how can we fix the issue? It all starts with change management, exposure, and training. Finance teams might need more exposure to the benefits of dedicated financial software, specifically solutions integrating AI and automation. They need to be shown how it can personally benefit them, which naturally facilitates adoption.

Competition is fierce right now. As businesses face growing pressures to optimize financial processes and embrace digital transformation, the need to transition from archaic tools to more advanced, integrated systems has never been clearer.

By doing so, finance professionals can unlock the full potential of modern financial technology, paving the way for a more efficient, accurate, and collaborative future. It’s time to say goodbye to spreadsheets for good!