Microsoft Excel is such a powerful, intuitive and familiar software tool that people think of it first whenever they need to work with relatively complex sets of numbers. Combined with Microsoft Word, Excel is frequently the quality control and/or reporting “system” of choice for new or small lenders, or for those who are forced to work with a no-cost solution. But Excel is not a database application, does not accommodate workflows very easily, and is wide open to human error. Among other things, manual cut-and-paste, manual data entry and formula errors can produce wildly incorrect results.
A pair of recent articles highlight the kinds of errors that are common in the worlds of business and finance, and that can lead to disastrous decisions. “The Importance of Excel” talks about the pernicious consequences of even small errors, concluding that “[w]hile all software breaks occasionally, Excel spreadsheets break all the time. But they don’t tell you when they break: they just give you the wrong number.” The second article talks about the dangers of false assumptions, selective data usage, and simple coding error. Both are worthwhile reads, if only to appreciate what actually goes into the models that business and political leaders seize on to validate their points of view.
Any tool is only as good as the fallible human being using it. That’s why savvy managers never take spreadsheets at face value, and why professionals insist on using the right tools for the right job.