While a host of different budgeting, forecasting and reportingtechnologies have faded in and out of popularity over the years,the simple spreadsheet has continued to be a mainstay of financeteams at credit unions for decades.

According to CFO Magazine, “Microsoft gauges the numberof Excel users worldwide at more than 400 million, and ForresterResearch estimates 50 to 80% of enterprises still use stand-alonespreadsheets for critical applications like financialreporting.”

The ubiquitous Excel spreadsheet is simple enough for anybeginner to understand yet powerful enough to support high-levelapplications and modeling. However, are spreadsheets being utilizedproperly to best support the institution's business objectives?

Many industry experts deride the use of spreadsheets as part ofa closed-loop performance management process because they tend tobe error-prone, they lack the level of control required by largerinstitutions, and waste valuable resources on mundane activitiessuch as uploading, downloading, reconciling, emailing, cutting andpasting.

Despite these well-documented deficiencies, the spreadsheet isnot going away anytime soon and continues to be favored by financeprofessionals due to its modeling capabilities and ease of use.

Within a credit union's performance management domain –including budgeting and forecasting, reporting and analytics,strategy management, profitability and cost management –spreadsheets remain the de facto management tool, but there areways to leverage performance management technology and embraceExcel in a more innovative, impactful way.

Enhancing the Familiar

It is critical for performance management software to produceuseful, accurate calculations, but the software should alsocomplement and enhance Excel's capabilities to satisfy the creditunion's need for complete flexibility and control. For example:

Data Storage and Access

The credit union's performance management data source must beclearly defined and easily accessible, as an audit can arise at anymoment. Data should be stored in a secure repository that isaccessed and manipulated through an easy-to-use Excel interface.Budgets, models and reports – including logic and formatting – aremanaged and stored in one platform to be used in a consistentmanner across the organization. This results in trusted data thatcan be used confidently in decision making.

Multi-Dimensional Reporting

Instances may arise when a credit union needs to create a uniquegrouping of data for reporting purposes. By using a consolidatedperformance management platform vs. stand-alone spreadsheets, itbecomes possible to easily aggregate and present any data acrossthe credit union's multi-dimensional landscape, eliminating thecredit union's need to use formulas to consolidate data housed instand-alone spreadsheets.

Scalability The use of stand-alone spreadsheetsis manageable in low user count environments, but completely out ofthe question in medium to large user populations. The goal inserving large user populations should be the delivery of robustbusiness models that are unique to the individual without requiringmanual intervention from the system administrator. Well-designedperformance management software allows credit unions to designbudget templates and calculation methods that align with theirdifferent business segments – such as back office and front office– and at the touch of a button, will format data into uniqueplanning workbooks with no manual intervention required.

Security and Workflow

Stand-alone Excel spreadsheets are nearly impossible to managefrom a security and workflow perspective. Passwords can be appliedto spreadsheets, but the design was never intended for a broadaudience with various rights and authorization levels. Performancemanagement software with dynamic read/write access provides greaterflexibility to meet the credit union's desired workflow andspecified approval chain.

Credit unions should consider leveraging performance managementsoftware that includes these capabilities, as it will satisfycompeting needs of flexibility and control in performancemanagement reporting and analysis.

Next Page: Excel as Foundation

Excel as Foundation, NotAfterthought

The spreadsheet is a great baseline tool because it is bothpowerful and more importantly, familiar. As a result,nearly all performance management technology providers offer anExcel add-on.

However, maximizing the value of your performance managementsolution and eliminating Excel's problematic qualities requiressoftware that moves beyond a simple add-on in which Excel acts as alens, simply looking into the complex database where the creditunion's core logic is created and managed.

Relegating the calculation logic to database script logictypically results in either a system too unruly to maintain, or onethat's too simple to derive much value from. The lack of userfriendliness inherent with script-based systems causes users torely heavily on IT and to give up attempting any level ofsophistication with their models – often keeping separatespreadsheet models outside of the core system.

There is a better way. Performance management software solutionsshould embrace and maintain the financial modeling capabilities andease of use that financial professionals know and appreciate, whileensuring the data integrity, security, workflow and enterpriseperformance that the organization requires. The result isactionable information that the credit union can trust andunderstand to enable better decision making, for example:

• Calculation methods help to ensure theintegrity of corporate models without sacrificing robustness orease of use. Calculation methods can be simple – such as spreadingan annual total across a 12-month period based on the value ofanother variable – or quite complex – such as computing the averageyield of an adjustable rate mortgage portfolio across time given aparticular interest rate forecast and prepayment model. Calculationmethods embrace Excel syntax but add to it numerous capabilitiessuch as the ability to read/write from and to a controlleddatabase, the ability to point to centrally managed driver tablesin order to consistently use common calculations across the entireorganization.
• Variable extraction is the ability to extractand manage common variables (interest rates, sales volumeprojections etc.) separately from the calculations they influence.This concept is tremendously powerful, enabling power users toperform scenario testing and sensitivity analysis to key drivers.Variables can be enterprise-wide or limited to a portion of theorganization, such as a region. The many-to-one variable model isenabled without linking spreadsheets – a vital distinction fromstand-alone Excel. This approach greatly adds to the power andintegrity of any collaborative financial model.
• Dynamic referencing eliminates a standardpitfall of Excel fixed-cell references. Calculations that point toother locations in a spreadsheet can be compromised when thespreadsheet geometry changes, typically in the form of adding ordeleting rows and columns. Organizations should embrace the conceptof dynamic referencing, which alleviates the fixed reference issuewhen spreadsheet geometry changes, while giving users the abilityto add or delete columns and rows based on their user profile.
• Error trapping directs users to the exactlocation where a calculation error occurs, so credit unions caneasily solve those all-too-common Excel error messages and ensurethat workbooks, reports, and models retain their integrity.

Overall, the ability to manage performance managementcalculations will reduce spreadsheet errors without sacrificingrobustness and ease of use.

The Ongoing Debate Within the realm offinancial budgeting and planning, there will always be argumentsfor and against Excel's capabilities, but despite its faults anddeficiencies, any attempts to replace or eliminate the spreadsheethave fallen short.

To overcome Excel's shortcomings, credit unions should leveragea performance management solution that expands upon thefinance-friendly nature of Excel while eliminating the error-pronefunctionalities of stand-alone spreadsheets to satisfy both thecredit union and its IT department's needs.

Alleviating repetitive, labor-intensive tasks and streamliningperformance management operations enables credit unions to betterfocus on strengthening operational processes, resulting in moreprofitable growth and an overall greater user experience.

Peri Pierone isCEO of Axiom EPM inPortland, Ore.