Is SpreadsheetAccuracyTheory a thing?

I’ve been working with a lot of spreadsheets recently. To those who know me, that won’t come as a surprise. My family jokes that my ideal Xmas present is a spreadsheet containing errors that I have to find.

There’s some, (not a lot), of truth in that though. The reality is, despite our best intentions, we know there are errors in our spreadsheets.

And when the spreadsheet is the financial forecast for your business plan, that can be a challenge. Hopefully, any errors are discovered before you sign a funding deal, and sometimes that isn’t the case. Formulae are often complex, difficult to maintain and we have no idea where all the errors might be.

A 1987 study by Davies and Ikin which reviewed 19 business spreadsheets from 10 organisations found that only five (26%) were error-free. In fact, Spreadsheet Accuracy Theory tells us the likelihood of there being an error in our financial forecast is anywhere between 7% to 81%, with the number increasing the more complex the spreadsheet and the fewer the people who have reviewed it.

When we walk into a casino, we know the house never loses, we don’t expect the same when we put together a financial forecast, and yet, in reality we are just as likely to lose somewhere along the line.

Far too many businesses are run on spreadsheets.  And when that includes crucial information such as cash flow forecasts an error could conceivably result in a big hole in the bank balance.

Purposeful planning breaks free from spreadsheets (as far as possible) and moves the complex number crunching into tried and tested software.

That’s surely a better option?