Spreadsheet Errors
- 1. Spreadsheet errors, and how to avoid themDesigning Financial Models that Work Vineet Tanwar
- 2. Why are they relevant?Over 95% firms use spreadsheets to take business decisionsWrong decision making: When business decisions are based on spreadsheets, error in spreadsheet may lead to wrong decisionsWastage of time and resources: Poorly constructed or erroneous spreadsheets lead to wastage of employees time
- 3. How do errors creep in?We live in a complex business world, full of decisions made using spreadsheetsA wrong input leads to a wrong output, and to poor decisions, many of them easily avoidableTo err is only human
- 4. Common errors Hard coding of details: Makes it impossible to view the calculations.Wrong referencing of cells: Lead to multiple errors Improper choice of colors: to display various inputs, assumptions and outputsIncompatible versions: “Stickiness” to old and obsolete version, incompatible with new toolsCreating bulky spreadsheets: Not using advanced tools such as data tables, etc, to manage large data sets
- 5. So, how to avoid them?Ballpark : If it doesn’t feel right, probably it isn’t.Review: To err is human, but good reviewing practice avoids many errorsKISS: Keep It Short & SimpleOrganize: Keep a spreadsheet template which is consistent with the design requirements and outlines the approach properly Use advanced tools, like data tables, etc to manage large data sets