As smaller businesses grow into medium-sized businesses, the sophistication of their financial management strategies must expand as well.
Though there is a widespread push among the business community toward modernization — a discussion often centered around the need to ditch the spreadsheet — the chief financial officers of SMBs continue to wade through troves of siloed data, which makes financial planning and analysis (FP&A) a tedious endeavor.
Didi Gurfinkel, co-founder and CEO at DataRails, recently explained to PYMNTS that the Excel spreadsheet is actually an instrumental, highly valuable tool for finance professionals, especially when running FP&A reports. Enhancing the power of the spreadsheet, rather than forcing CFOs onto an unfamiliar system, could be the strategy that yields more effective financial planning — and jump-starts the finance department’s own modernization journey.
The Power Of The Spreadsheet
Gurfinkel‘s experience has shown finance leaders to often lag behind other departments when it comes to modernization, which he described as a “state of mind.”
“One of the last departments in the organization that still hasn’t performed this transformation is the CFO’s office,” he said. “If you take a typical board meeting or management meeting, the VP of sales will present a beautiful dashboard with all of the marketing analytics. The CFO will open the Excel spreadsheet. This is how things work.”
The spreadsheet has become somewhat of a four-letter word in corporate finance today. And indeed, the tool is a legacy solution with limited functionality, prone to error thanks to the need for manual data entry. Yet there is a reason the spreadsheet remains so ubiquitous: It is familiar — and, as is often the case, it works.
When it comes to FP&A, the biggest challenges aren’t merely aggregating data across a variety of platforms and sources. What needs to happen, as Gurfinkel explained, is the human manipulation of the data — for example, adjusting foreign currencies into a single, local currency. Only after that consolidation and standardization can effective analytics occur.
“Because of the nature of this process — which is taking data from multiple sources, consolidating it together and running unique analytics for the organization — the only tool today that actually supports this capability is Excel,” he said. “This is why, when we look at the market, you will see 90, if not 95 percent, of an organization uses Excel for financial planning.”
Digitization, The CFO Way
DataRails, which recently announced a $25 million funding round to top off its Series A round, which now totals $43.5 million, aims to support the CFO’s modernization efforts without disrupting their reliance on the spreadsheet.
Forcing finance leaders off of the spreadsheet and onto new platforms can be arduous and expensive. It’s important to preserve SMBs’ existing forecasting models and formulas that are already in use, said Gurfinkel.
Instead, it’s key to elevate the capability of the spreadsheet and mitigating its biggest pain points. That means enhancing version control so everyone has the most updated version of a spreadsheet and migrating the spreadsheet to the cloud to promote transparency, rather than having it live on one individual professional’s desktop.
Using technology to streamline workflows that have already proven to be effective in the enterprise means cutting down the time it takes to gather, consolidate and streamline data, and enabling CFOs to take a more agile approach to providing financial insights.
“The FP&A manager constantly seeks very specific analytics. They know exactly what they are trying to do,” said Gurfinkel. “When you ask them to see the month before, they don’t actually want to know what happened last month. They want to know what happened last month compared to the previous month … the difference between different scenarios, different periods, different product lines, different salespeople.”
Acknowledging the analytics that CFOs and FP&A managers need, and empowering spreadsheets to more effectively deliver those insights, can be an effective way of supporting the finance department’s modernization efforts without disruption. “That is one of the basic criteria for our customers: to be ready for digital transformation,” Gurfinkel added.