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Excel Nightmares Part I: Accuracy
What keeps you awake at night? We’re willing to guess the idea of losing millions (or even billions) of dollars to a simple spreadsheet mistake might make the shortlist. During this series, we’re exploring the damage that Excel can do to you and your company checkbook.
We don’t hate Excel; it’s a great tool, in many respects. What we do hate is hearing so many painful stories about large corporations relying on Excel for their reporting, and making some very costly mistakes (particularly because there are many great alternatives to Excel). We know that 95% of firms use Excel for financial reporting, but we also know that 90% of spreadsheets contain errors. I don’t know about you, but I don’t like the odds. If you’re drowning in time-consuming reports, lack of version control, and an inordinate amount of risk, you may be in what we call “Excel Hell.”
We’ve all heard about JP Morgan’s infamous 6-billion dollar Excel mistake, but what other major Excel issues have been widely publicized?
We’ve uncovered three instances where accuracy is to blame. From typos, to simple errors, to cut-and-paste disasters, these Excel users had to pay a painful price for some simple mistakes. We’ve tied each of these three errors to one of our “39 Clues You’ve Outgrown Excel & Powerpoint.” (If you’re interested reading more clues that aren’t listed below, you can download the guide for free.)
Excel “Accuracy” Nightmares
#16: “The Typo Chaos You Wish You Could Change”
During the 2012 Summer Olympic Games in London, England, Olympic officials learned about simple typographical errors the hard way. An employee in the ticketing department accidentally entered “20,000” into a spreadsheet instead of “10,000”; this number represented the number of remaining available tickets for the synchronized swimming events.
The agency spent a huge amount of time contacting 3,000 ticket holders to make alternate arrangements. To soften the blow, they offered tickets to events that the ticket holders hadn’t been able to purchase previously. In fact, 200 lucky synchronized swimming fans got to watch the men’s 100-meter swim finals, a highly-anticipated event.
However, the Olympic organizers weren’t feeling quite so lucky. Tickets for the swim final sold for around 75£ and synchronized swimming sold for only 20£. Those 200 ticket upgrades alone cost the agency 11,000£ (which equates to roughly $11,800, by today’s standards). This was a major embarrassment (and hefty expense) to the event organizers and ticketing staff. (You can read more about the error at the London Olympics in this Telegraph article.)
The moral of the story? It’s easy to make a simple error like this; people do it every day. Unfortunately, even one tiny typo can ruin an entire report or spreadsheet and cause some serious damage. Beware!
#18: Inevitable Entry Errors
In 2004, a formula error in Excel led officials at the University of Toledo to believe they had another $2.4 million in their budget. It was soon discovered that the mistake had caused them to dramatically overstate their budget. What’s worse is that they only found this error one day before the Board of Trustees was set to approve their budget for the upcoming year.
This was a particularly devastating blow because the University of Toledo had recently discovered that the state of Ohio was cutting their funding by about $500,000. (You can read more about this Excel mix up in The Toledo Blade.)
According to a journal article entitled “What We Know About Spreadsheet Errors”, Raymond Panko notes that there are three different types of spreadsheet errors: quantitative (the spreadsheet gives an incorrect result), logic (someone enters the wrong formula because of a mistake in reasoning), and omission (something is left out). In 88% of spreadsheets, at least one of these errors occurs. This means that there is a high likelihood––nearly nine out of 10 times––that an error will creep into your data one way or another. Lesson learned!
# 20: Cut-And-Paste & Lots Of Waste
After macros and linked spreadsheets fail, many Excel users lean on cut and paste. Be careful! One wrong cut-and-paste could land you in the middle of an expensive nightmare.
Such was the case with TransAlta, a Canadian power-generating firm. In 2013, what was reported to be a “simple cut-and-paste error in an Excel spreadsheet” caused TransAlta to purchase more U.S. energy contracts than planned. It turned out to be a 24-million dollar mistake––ouch! Read more about the TransAlta Excel error in this article.
Alternatives To Excel
Unfortunately, these errors in accuracy are a common occurrence for companies worldwide who are using Excel or other spreadsheet software for their reporting. The only way to truly avoid these inevitable issues is to use a software that’s built specifically for reporting. If you’re ready to make the switch, check out this article to learn more about the best report generation software options.