Are Excel spreadsheets putting your construction business at risk?
Executive summary
There have been multiple iterations over the years and the program has grown to become what is arguably the world’s most widely used business solution.
Millions of people are familiar with Excel and many use it every day, at work and at home. But how much do they really know about how it works… and how to avoid the pitfalls?
During the last 20 years, many organisations have become over-reliant on Excel spreadsheets. As a result, simple formula and cut-paste errors have led some companies to make disastrous decisions that have ended up costing billions.
This concern was echoed in an article published by Forbes in 2013: “Microsoft’s Excel Might Be The Most Dangerous Software On The Planet”.
Although Microsoft continues to improve its Excel software, errors keep cropping up.
Excel spreadsheets are widely used across the UK construction industry.
Every day, construction employees enter formulas onto Excel spreadsheets, often by ‘cutting and pasting’ figures from disparate systems. These practices may seem harmless enough, but don’t be deceived, because what might at face value appear to be an insignificant spreadsheet error could spell disaster.
As a construction company, what can you do to protect your major projects – and your business – against this very real threat?
A little knowledge is a dangerous thing
Studies show that most large spreadsheets contain errors – this exposure to risk is a major cause for concern.
Ray Panko, Professor Emeritus of IT Management at the University of Hawaii, is an authority on spreadsheet bad practice. Based on the findings of multiple research studies into spreadsheet error, he concluded that “in large programs, at least one incorrect bottom-line value is very likely to be present” and that “errors are extremely difficult to detect and correct”.
In recent years there have been countless examples of spreadsheet errors wreaking havoc on businesses and lives.
Here’s an eye-watering selection…
- 1994 – a tax accountant accidentally omitted a minus sign when transcribing the financial records for an investment fund to a spreadsheet. A £1.3 billion loss was reported as a £1.3 billion gain. As a result, the dividend estimate spreadsheet was out by a whopping $2.6 billion.
- 2012 – the London Organising Committee of the Olympic and Paralympic Games came unstuck when ‘20,000’ was accidentally typed in a spreadsheet cell instead of ‘10,000’. This led to 10,000 tickets being sold for non-existent seats at four synchronised swimming heats.
- 2020 – a widely reported blunder, thought to have been caused by an Excel million-row limit, resulted in Public Health England failing to add more than 15,800 confirmed coronavirus cases to its official daily figures.
Clearly, a little knowledge really is a dangerous thing.
Is Excel putting your business at risk?
Excel is a complex program. Plenty of people use it every day for routine tasks, but how many of your employees have been trained in its many intricacies and understand how to avoid the pitfalls? Is mere proficiency enough?
Listed below are three of the most common errors made in Excel – how confident are you that they haven’t happened in your organisation this week?
- Cut-paste errors – it’s easy to make a mistake when cutting and pasting info into a spreadsheet or between spreadsheets. There’s a very real risk of transferring an incomplete figure or pasting it onto the wrong cell, for example.
- Not deleting but hiding – if you ‘hide’ a cell, it looks to all intents and purposes as if it’s blank. But it’s not, because the cell value remains in place… and the spreadsheet’s algorithms will include it.
- Incorrect formulas – without an appropriate level of knowledge, experience and training, inserting formulas for anything other than basic calculations on Excel can cause problems.
Spreadsheets – the inherent weaknesses
Excel spreadsheets are being used throughout the construction industry, including by finance teams, estimators, buyers and human resources. But they have many built-in weaknesses.
• No automated error checking
As highlighted earlier, data entry is prone to human error. Unlike modern, integrated enterprise resource systems, Excel has no automated checking process, so it’s down to individual users to test their formulas and check that they work as planned.
That’s far from ideal because if left unchecked, a seemingly innocuous spreadsheet error may be compounded, growing into a many-headed beast that carves out a gaping black hole in the profitability of a project or even an entire organisation.
In 2012 errors in an Excel spreadsheet that was used to model risk are thought to have contributed to the London Whale disaster and a loss of more than $6 billion. The problem was apparently exacerbated by copy-paste mistakes between spreadsheets.
• No tracked changes
Today there’s a big emphasis on collaborative working in construction and many people are using Excel spreadsheets to facilitate this. However, a major shortcoming is the inability to track changes in Excel.
A user could inadvertently add the wrong figure – or delete an item – on a spreadsheet used by multiple individuals or teams and nobody would be any the wiser.
• No electronic workflow and approvals process
When multiple input and oversight are needed among team members, Excel does not have built-in workflow and approvals capability. This leads to unnecessary and unproductive communications among team members or – worse still – actions being taken on unapproved data. The consequences can be serious and costly.
• Multiple spreadsheet versions
What’s to stop a user downloading a team spreadsheet and going off to ‘do their own thing’ with it, tweaking it to suit their own work needs?
You risk ending up with multiple versions of a spreadsheet, disparate islands of information and a very real possibility of basing management decisions on out-of-date information – a nightmare scenario for version control.
• Lack of security
Be on your guard against viruses and any trojans that may be lurking. Unencrypted USB sticks are also a big risk. Security features such as password protection and hiding or protecting sheets are not actually designed to secure information and can be bypassed easily.
For example, in February 2020 UK company The Excel Experts published an article warning that a hacking group called Evil Corp had been carrying out a phishing campaign and had begun using Excel documents as a new tactic: “The infected Excel documents contain a malicious macro virus, which can infect a computer’s system when a document is opened or closed.”
Excel is not the only option
Having read this far, you may well be experiencing nagging doubts about the extent to which Excel is being used across your organisation… and the risks this may be generating.
Technology has moved on a long way in recent years. Viable alternatives to spreadsheets are now available, including construction project management software that has been developed solely with your industry in mind.
If you’re in construction looking to overcome your organisation’s current reliance on Excel, here are the must-haves that we believe you should be on the lookout for in an ERP solution.
Construction-specific
Look for a solution that deals with the nuances of the construction sector as standard, like project costs, variations, sub-contractor management with CIS, applications for payment, valuations and CVR, to name but a few
A single source of truth
Instead of having islands of information dotted around the company, manage it all within a secure central database.
Choose a system that always presents users with real-time project data and the latest version of project documentation, prevents duplication of entries, notifies collaborators of changes and stores all previous versions securely
Cloud technology
Switch to cloud-based hosting for endless data storage capacity. There’ll be no cumbersome servers to maintain and all software updates will be applied automatically. Your employees will be able to work remotely, securely and efficiently from any location with internet access
Reports
Choose a system that generates real-time reports and provides you with an instant, user-friendly overview of key metrics and the ability to drill down into the details behind them.
You’ll be wanting to use the system to keep a close eye on costs and profitability, so check that you can set alerts, to notify you if anything starts to go awry
Permission Levels
Check that the system allows you to restrict access at company, division, user and document level, for viewing and editing
Mobile Applications
Select a system that enables your managers and operatives to use their smartphone or tablet to complete user-friendly electronic forms (anything from goods received notes to health and safety information) while they are on-site, ready for automatic upload to a central server when connectivity becomes available
Workflow & Approvals
Stop endless paper chases. The system should enable multiple electronic workflows and approvals, giving all team members visibility of where you’re at.
Integration
All elements of your chosen system should of course be perfectly integrated, including construction, finance, payroll and human resources. Make sure you check out how well the system integrates with other software that you need to use within your business.