5 (more) common ways businesses abuse spreadsheets

EducationSummary: Creating billions of dollars in losses every year, spreadsheets regularly take the blame for data errors and financial losses. But, are spreadsheets really to blame? The fact is, businesses regularly use spreadsheets in ways they were never intended to be used. This misuse leads to data losses, security breaches, financial losses, and more. Is your business guilty of abusing spreadsheets in the 5 ways outlined in this article?

photo credit: geralt via pixabay cc

photo credit: geralt via pixabay cc

When this happens, problems arise. Spreadsheet abuse often leads to wasted time, data loss, security breaches, and even financial loss.

The problem: This spreadsheet abuse happens far too often.

How? In the first part of this two-part article, we covered these 5 common ways businesses abuse spreadsheets:

  1. As a database
  2. As a CRM system
  3. As Project Management and Workflow Tools
  4. As an integration tool
  5. As a budgeting tool

But, that is (unfortunately) just the tip of the iceberg. Today, let’s cover 5 more ways businesses misuse spreadsheets, and list a few problems associated with each one. Businesses abuse spreadsheets when they use them:

1. As a time tracking tool

Using spreadsheets as an employee time-tracking tool may seem harmless. After all, it’s not a document that multiple employees need to access. It doesn’t require collaboration. So, why is it a problem?

One big problem arises from the fact that errors are so easy to make in spreadsheets. A simple misclick can ruin the entire time-tracking spreadsheet, or produce inaccurate results. And, as mentioned below, that’s just the tip of the iceberg.

“Spreadsheets and even paper-based processes are rife in many companies to track employee hours,” says Jose Gaona, Vice President of Product Strategy at Replicon. “Not only can this be fraught with errors as spreadsheets weren’t optimized to manage multiple staff rates, projects and tasks – but it’s also not able to integrate seamlessly with payroll for quick and accurate processing. This issue is magnified as a company grows and it needs to take into account global wage and hour regulations including mandates on overtime pay and time off, as timesheets using spreadsheets have weak controls, making them more susceptible to time theft and inaccurate data entry.”

Potential problems created when you use spreadsheets as a time-tracking tool

Data errors: Spreadsheets make data errors easy to make, yet hard to catch. Do you really want to risk data errors with something as important as time tracking (which impacts payroll)?

Wasted time: Manually reviewing and managing timesheets wastes time. Just imagine how much time gets wasted manually checking timesheets and importing that data into payroll software.

Risk of noncompliance and lawsuits: Poor time tracking can lead to audit failures and a failure to comply with wage-and-hour restrictions. According to the National Employment Lawyers’ Association, there has been a 77% rise in FLSA lawsuits tied to wage-and-hour disputes since 2004.

2. As a password manager

photo credit: stevepb via pixabay cc

photo credit: stevepb via pixabay cc

In a recent article, we covered reasons why businesses still struggle with application security. Despite the growing importance of security, many businesses put their data at risk through insecure practices.

One practice that you can add to that list: storing passwords in a spreadsheet. Keeping login credentials for sensitive data in a spreadsheet is like putting a key to your house on your front porch. Hackers attack the point of least resistance. Why try to break into a secure application, when so many businesses keep login credentials in unprotected spreadsheets on their computer?

“Frequently companies share passwords for administrator accounts instead of using two-factor authentication,” says Nick Owen, Co-Founder of WiKID Systems, Inc. “Attackers need these credentials to gain control of systems. They look for spreadsheet files like this (which will be on each administrator’s computer) and if they get one, they own your network. Just using static passwords is bad. Once an attacker is on your network, they can read the hashed credentials an admin uses and just replay them to get access. Two-factor authentication thwarts this “pass-the-hash” attack. When the attackers try to log in and fail repeatedly, alarms should go off.”

But, the problem doesn’t stop there. Businesses use spreadsheets to store all types sensitive data–including customer information. If the spreadsheets get compromised, your business stands to lose far more than data. The entire business could be at risk.

“Businesses and employees have mistakenly employed spreadsheets to store sensitive data that they were never designed for, like passwords, account credentials, credit card numbers, employee personal information, WiFi and alarm codes, and more,” says Shane Green, Co-Founder & CEO of Personal.com. The spreadsheet is now the single most-used tool for managing this kind of information.”

“Spreadsheets weren’t designed to easily protect sensitive information. The kinds of advanced encryption and protections used for spreadsheets in the CFO’s office never make their way out to the rest of the organization. If lost, stolen or accessed by an unauthorized person, as the world saw in the Sony hack, the sensitive information stored in business spreadsheets could put individuals and the company as a whole at risk.”

Potential problems created when you use spreadsheets as a password manager

Security: Using spreadsheets to store sensitive data is a huge security risk. If that document falls into the wrong hands, your business data, customer data, and even your entire business could be at risk.

Data Loss: As spreadsheets age, they become easily corrupted. What would it cost your business if your sensitive spreadsheets become corrupted, and you can no longer access the data?

3. As a Dashboards/Reporting tool

“Excel is not a reporting tool,” says Harrine Freeman, CEO/Owner of H.E. Freeman Enterprises. “It provides great reports and graphs if you need simple tasks completed. However, if you require reports that are more extensive you should use a reporting tool.”

Yes, spreadsheets do include graphing capabilities. The problem is, businesses try to expand these graphing capabilities across their entire organization. They pull data out of their systems, merge it in a spreadsheet, and create reports and dashboards over that data.

Why is this such a problem? Besides the obvious risks of spreadsheets (88% contain serious errors), it’s a huge time drain. I’ve seen employees in some companies whose job revolves around spreadsheet reporting. It’s a tedious, error-prone reporting method…which occurs far too often.

photo credit: Negativespace via pixabay cc

photo credit: Negativespace via pixabay cc

“One of the most common ways I see businesses misuse spreadsheets is when they try to use them as dashboards for running their business,” says David Cusimano, Partner at Emerge Dynamics. “Using a spreadsheet requires hours of formatting accounting and operations data in order to create the proper metrics which means it usually doesn’t get done. Then, even if someone has set up a relatively automated template, the dashboard isn’t updated in real time and thus always lags.”

“I’m a good candidate to discuss this because I have lived it. I started and ran a flight training business which was a mess until I realized I needed a dashboard. But then because of the complications of keeping an Excel based dashboard up to date, we rarely updated it. It was useless. We became so frustrated that we hired a programmer to develop a tool for us which pulls our Quickbooks data and other operations data and real time plugs everything into a cloud-based dashboard. All of our staff members can log in now any time at their appropriate access levels and view their real time performance. It’s a dream.”

Potential problems created when you use spreadsheets as a dashboard/reporting tool

Wastes time: Creating reports in spreadsheets is a time-consuming process, especially when compared to the alternative: An automated reporting solution. Not only would it cut out the hours/days of labor, it would give your executives access to the reports they need at any time.

Data errors: As you will see in this page of spreadsheet horror stories, reporting errors have created all types of problems for businesses. From failed audits to million dollar losses to faulty budgeting and everything in between, spreadsheet reporting errors wreak havoc on companies.

Old Data: With spreadsheet reporting, you never have the data when you need it. Since the reporting process is so time consuming, turnaround time on a new report might require a few days. By then, you’re delivering old data.

4. As an inventory management tool

For a small company, using a spreadsheet to track inventory may seem harmless. There’s not much to track, and it’s easier than setting up an inventory tracking system.

The problem is, the longer you use that spreadsheet, the more you rely on it. After a while, business has grown, but you’re still stuck using the same spreadsheet for inventory tracking. As explained below, the longer you use spreadsheets for inventory, the more problems arise.

photo credit: delphinmedia via pixabay cc

photo credit: delphinmedia via pixabay cc

“A typical way for someone with a retail store to keep track of their stock and their sales and purchase orders is to use a spreadsheet,” says Dimitris Athanasiadis – the Online Marketing Manager at Megaventory. “It’s a fast and versatile tool which is easy to obtain and it’s usually something that can be used by anyone, powerful in its simplicity.”

“Or so it seems. Because no matter how much elaborate work goes into setting up rows and columns, a spreadsheet simply cannot capture the essence of working in retail, issuing orders to vendors and receiving products and consequently handling incoming client orders and dispatching sold goods. It seems simple but as soon as business grows the various ways in which the approach fails becomes apparent. Looking back into previous orders becomes hard, tracking product returns or repairs almost always causes problems and delays and the reporting functionality (which is one of the main purposes of keeping track of everything) ends up being time-consuming and inaccurate.”

Potential problems created when you use spreadsheets for inventory management

Data errors: With spreadsheets, everything is manual. If an employee forgets to update one cell, or forgets to list a product return, your inventory tracking becomes inaccurate.

Wasted time: Keeping track of all product movement manually is a time-consuming process. As your business grows, this process becomes increasingly difficult.

Lack of visibility: As mentioned above, tracking inventory in this way only makes reporting difficult. When you can’t easily access your data, it’s hard to manage a business.

5. As a Point-of-Sale System

A Point-of-Sale (POS) System lets a company capture data and customer payment in their physical business. Retailers and restaurants are two types of businesses where POS systems are commonly used.

As scary is it might sound, these businesses often rely on spreadsheets as a POS system. While it might work fine for the smallest of businesses, it comes with severe limitations. As explained below, businesses quickly realize that spreadsheet-based POS systems cannot provide the reporting features they need.

“From our research, we know that countless retail and restaurant owners misuse Excel everyday,” says Justin Guinn, Small Business Market Researcher at Software Advice. “Rather than adopt a POS system that will integrate all their data and articulate invaluable information in cohesive, easily understood reports, business owners stubbornly try using Excel for many of their business’ needs. As evidence of this, a recent analysis of the many free consultations we have with retailers everyday, unveiled that 76% of first-time retail POS buyers are requesting sales reporting and analytics functionalities. Thus, it’s a top concern for retailers ready to make the switch to a POS. What’s great for them though is that the reporting capabilities are just the tip of the iceberg when it comes to the overall benefits offered by POS systems.”

Potential problems created when you use spreadsheets as a POS system

No integration: Data stored in spreadsheets cannot integrate with other business systems. Integrating spreadsheet data with the rest of your business data is a time-consuming process.

No visibility: With a POS system, reporting is critical. You need to quickly view and understand your sales data, and the overall health of your business. However, as mentioned above, spreadsheet-based POS systems do not offer this visibility.

Data inaccuracies: The more employees that access a spreadsheet, the greater the chance for errors. Do you really want to risk inaccuracies with your sales data?

Summary

Now, these are just a few ways businesses misuse/abuse spreadsheets, but the list could go on. If you would like to add anything to this list, I’d love to hear it. Feel free to share in the comments.

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