Digital transformation in finance will be built on Excel

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It’s been fashionable of late to consider, if not accept as fact, the idea that Microsoft Excel, the trusty workhorse of accountants globally, is becoming outdated. But before you add spreadsheets to the pantheon of obsolete IT, I’d suggest you consider a few facts.

Earlier this year, the American Institute of CPAs (AICPA) announced it will be eliminating its own, proprietary spreadsheet tool with — wait for it — Microsoft Excel.

This isn’t just notable because it means the next generation of CPAs will literally be using Excel as a gateway to joining the profession. It flies directly in the face of all the accepted “wisdom” that spreadsheets, and Excel in particular, deserves to die a quick death.

You’ve no doubt heard the arguments, that Excel spreadsheets:

  • Keep information in silos;
  • Are too manual and time-consuming to manage;
  • Lack important analytics, workflow or collaboration features;
  • Are prone to the most basic human errors; and
  • Can get out of control with different versions all circulating over email.

I’ll address some of those concerns in a minute, but first, let’s take a quick trip down memory lane to get a better understanding of why Excel has proven so difficult to displace, despite all the other technologies that have followed them.

Excel’s enduring appeal explained

Spreadsheets have been a staple of the profession because they’re simple to use and read at a glance. It’s important to remember that they are also “digital,” even if we tend to associate the term with more complicated applications.

In fact, Wired published an article last year headlined, "Worried About Robots Taking Your Job? Learn Spreadsheets," which summarized a study by the Brookings Institution on the use of digital tools between 2002 and today. The findings suggested that knowledge of tools like Microsoft Excel are a stepping stone to long-term careers:

Nearly two-thirds of new jobs created since 2010 required high or medium digital skills, the report says. That shift is problematic given America’s long-established deficit in basic digital skills, such as familiarity with spreadsheets or other workplace software, where US workers score well below other those from other advanced economies. Overall, the Brookings report suggests the window of opportunity for workers without basic digital skills or a college degree is closing.

Much like the AICPA’s decision to bring Excel to those taking its exam, the Brookings study shows spreadsheet skills won’t be disappearing anytime soon. They are not necessarily “basic” skills either, in some cases.

Just look at the agendas of CPA Australia’s ‘Unlock Excel’ series of conferences, which are delving into new approaches to data visualization, budgeting, variance analysis and more.

A recent article on InTheBlack magazine, meanwhile, shows how business professionals are using more recent versions of Excel to do 3D mapping of data, advanced forecasting in conjunction with Microsoft’s Power BI, and getting ahead of everything from inventory requirements to potential service failures.

“New features have transformed Excel into a business intelligence tool with some surprising and very powerful applications,” the author concluded.

These aren’t isolated examples. Just a few months ago a post on CFO Innovation called ‘Excel Isn’t Dead: How To Use The Venerable Spreadsheet For Forecasting’ walked through a detailed approach to taking historical data and applying the Trend function to get a set of numbers that multiple people in an organization can trust.

To put it another way, Excel spreadsheets might be a good example of what Harvard Law School professor Jonathan Zittrain has described as “generative” technology,” which he defines as tools that allow third parties to innovate upon without any gate-keeping. When you can use something as a foundation for solving a wide range of problems, it’s no wonder it becomes the de facto standard for an entire profession.

The ultimate anti-spreadsheet rebuttal

Despite all this evidence to the contrary, spreadsheet naysayers tend to get a lot of attention. A case in point came late last year, when the Wall Street Journal published a story suggesting CFOs were doing away with Excel. The comments from readers afterwards were vitriolic, to say the least.

Among all the responses, however, there was a very thoughtful take by Bloomberg columnist Nir Kaissar, which bears repeating as we look to the goals behind any digital transformation initiative:

“By requiring users to load and organize data, Excel forces them to make decisions about how to slice and calculate it. Sure, companies can outsource those judgments to specialized software. But by doing so, they’re also outsourcing much of the thinking,” Kaissar said. “And by design, that thinking isn’t always readily apparent in specialized software. Some critical assumptions and calculations run behind the scenes, forgotten and seldom challenged. Excel, on the other hand, is an open book. There’s nowhere to hide in its iconic cells.”

What Kaissar doesn’t talk about as much is what you can discover beyond those iconic cells when you connect spreadsheets to applications that are designed to synthesize information and make it ready for analysis.

Think of it this way: Digital transformation shouldn’t just be a quest to make us work faster, or get more done. It’s not merely a matter of connecting more readily with customers, partners and other members of our teams.

Excel and finance transformation: strange but perfect bedfellows

Digital transformation should allow us to make smarter, more data-driven decisions that lead to better outcomes.

This ties in directly with the aspiration of most finance and accounting professionals in 2018: to be more involved in guiding and shaping the strategy within their organization. That in itself represents a major change for those working in CFO roles, or as members of the CFO team.

These are people who readily acknowledge the need to take better advantage of the technologies that are emerging to help them be more successful, but to transform with digital technologies that represent an entirely new paradigm is probably a little overwhelming. It could explain why, a few months ago, a survey of U.K. finance teams on IT Pro Portal showed four out of five finance managers feel “left behind” in terms of digital transformation.

Nobody needs to be left behind. You can meet them halfway, with technologies they know and understand like Excel.

You can start with a conversation about what questions you need to be investigating through data, and what kind of data you have available right now.

Next, you can look at how that information is collected, stored and managed in things like Excel, e-mail and a host of other tools.

Then, you need to look at how to layer new ways of analyzing data that don’t require some of your most knowledgeable, talented people to start from scratch, but instead make them feel empowered.

Final thoughts

In many industries, the only buzzword more popular than digital transformation is “customer experience.” In other words, how do your customers think and feel about the journey they take with you as they make a purchase and afterwards?

Digital transformation has to look at the “internal” customer experience, where you don’t take away the things that employees have relied upon and try to force-fit a new experience. You build up their capabilities from a position of strength and familiarity.

As the shift to data-driven thinking continues, digital transformation will be seen as a means to an end, and the discussion won’t focus on the tools. It will look at the people on the team, and leaders won’t talk about whether they need spreadsheet skills or not but whether their thinking brings value or not.

CPAs deserve to be given every opportunity to excel — even if that means hanging onto Excel.

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