How to Plug the Leak and Stop Losing Money With Excel
In 2003, Canadian power generator, TransAlta, lost $24 million due to copy-and-paste mistakes. Two years later, Kodak added $9 million to its third-quarter loss due to a typo. And in 2012, JP Morgan lost $6 billion due, in part, to a copy-and-paste error in Excel.
Statistics have shown that 88% of spreadsheets contain significant errors. So out of 10 spreadsheets, only one is showing you accurate data. Do you really want to manage pricing off that?
Unfortunately, all too frequently, a decimal place can be the difference between an approved $1,000 customer accrual and a $1,000,000 financial liability.
You could argue that these errors were not the fault of the technology, but of the human using it. But manual processes and human error go hand in hand no matter how skilled or diligent the human.
Risk in pricing is a dangerous game. And, believe it or not, it’s not the only reason you shouldn’t be pricing in Excel.
The Many Failings of Excel
What? Compared to buying special pricing software, Excel is cheap, fast and everyone already knows how to use it!
The same can be said of a fast-food restaurant. However, the employees only have basic skills and offer little-to-no flexibility. You have to order off a rigid menu and aren’t allowed to swap fries for rings. You’ll get the gherkin whether you like it or not, because that’s how it comes, and you’ll have to pay extra for sauce.
Cost efficiency isn’t just about initial outlay. It’s about the value your solution adds to processes, the productivity it brings teams, the time it takes to deliver on expected results, the return it yields on investment and the competitive edge it offers you as a company.
So, just as you’d ponder the nutritional value of a $1 burger, so too should you be asking yourself whether your solution is doing your company justice.
Efficiency and Agility:
It takes a lot of data from a lot of sources to create accurate pricing. In an Excel world, interrelated data is often spread across various files and folders (even geographical locations). And then (unless using Excel Online), data needs to be shared via email, making it susceptible to inconsistent naming and a plethora of versions. Besides which, the spreadsheet logic of one user may be gobbledygook to another. Heaven help the new recruit… they’ll likely have to start all over from scratch.
Everyone knows that human error and manual tasks go hand in hand, so all those involved end up wasting precious time checking and double-checking the integrity of data across multiplied versions before some brave soul attempts to consolidate it all into a single version of ‘truth’ upon which to make important company decisions…
And how do they do this? Why, with good old copy and paste, of course. (Wait, didn’t TransAlta do something like that?)
And as for agility, well, Excel was never meant to be a tool for testing, it can’t alert you to pricing anomalies, it’ll actively slow down processes if your file gets too large, and you only get one view of your valuable data.
Scalability, Interoperability and Security:
As a pricing person, you’re a data devourer. You collect a vast amount of data because you know that data is king when it comes to making smart pricing decisions. So, you might feel a tad let down when Excel limits your inputs to 1 million rows. What about historical data? Do you need to store that elsewhere? Will you ever reference it if you do?
We’ve already seen that, as a standalone application, Excel is not integrated with your other business intelligence systems, resulting in siloed data and limited overall visibility. This means pricing teams have to switch back and forth between systems in order to do one job, copying and pasting all those juicy typos as they do.
Besides which, if your company is using Excel, it’s more than likely to be managed by non-IT staff who aren’t familiar with data security and backup best practices. If disaster strikes, it can be impossible to make a full data recovery.
And as for Excel scalability… um…what scalability?
Taking the Excel Out of Excellent
Without putting too fine a gherkin on it, Excel is the enemy of collaboration and the antithesis to efficiency.
If you’re going to take pricing seriously, then now is the time to invest in a pricing solution that was designed to be a pricing solution.
One that is cost efficient not just in initial outlay but when Total Cost of Ownership and Time to Value are considered, one that delivers efficiency and agility by the bucket load through streamlined processes, automated workflows, and a central hub for all data. Plus, one that is ready at all times to power your pricing and grow as your company does – up and up and up.
No more gherkins. It’s time for Pricefx.