Real Problems in the Real World
Interviews with CFOs at midsize companies confirm these survey findings and shed light on the real world problems that companies face when running their enterprises off a mosaic of spreadsheets. Warren Green, CFO of One Call Medical Inc., a New Jersey-based outsourcing company specializing in medical services for workers’ compensation claims, bemoans the inflexibility, data inaccuracy, and time-consuming aspects of spreadsheets. “With our spreadsheet model, I was unable to do ‘what if’ scenarios or work flow management,” Green says. “I spent more time building and managing the model, and making sure none of the links were broken, than I did managing the data and analyzing it to ensure it fit the strategic plan. Aligning the spreadsheets was a nightmare. A simple change like someone adding an account threw the whole template [of operating expenses] out of whack. But the real drawback was my inability to do an analysis of data to make better decisions, to re-forecast or otherwise plan accordingly.”
The finance team at Brock White Co. relies entirely on spreadsheets for planning. And the company’s struggle to build and maintain accurate analytical models distracts finance staff from higher value, analytical activities. “It’s a hellish process that gets more complex every year,” says Ted McArthur, vice president of finance at the St. Paul, Minnesota-based distributor of construction products, with nearly $100 million in annual sales. “We do 30 lines of revenue per branch at each of our 13 locations, with each line representing a product segment,” says McArthur. “If we take an annual salary for someone and spread it over 21 business days in a month, a simple change to 22 business days requires us to change a ton of formulas. We’ve also had to endure errors, where we’ve added up sales for all the branches, but we’re undermined by the one branch that didn’t extend the formula to reach enough rows and missed a whole person’s salary.” McArthur says that each year the model gets more complex, and “we introduce more potential for error. We need improved clerical accuracy on the budgeting side, where the numbers always add up. And on the forecasting side we need better analysis tools for looking at the business.”
Brock White is currently evaluating analytical applications for planning, budgeting, and forecasting with a view toward improving data analysis and engaging more managers in the financial side of the business. Says McArthur, “I want to get away from spreadsheets and publish the data electronically, then push it to more people than just finance or senior management so they can make more informed decisions. I also want to take the resources out of maintaining the spreadsheet-based model and put them into thinking about the business itself.”
Re-forecasting in a complicated spreadsheet environment drove Timothy McNair, controller at Pennsylvania-based C.F. Martin & Co. Inc., the well-known manufacturer of guitars and acoustical instrument strings, to rethink the technology behind his planning process. “At the end of 2002, our sales were $77 million, and we forecast 2003 sales of $81 million,” recalls McNair. “We hit the month of May and realized there was no way we would make the forecast and cut our sales plan back almost 10 percent.” C.F. Martin’s executive team needed to immediately determine the overall financial impact of the reduced sales plan.