Why are Retailers Stuck in the Spreadsheet Mud? Is this sector lagging behind the Fintech curve…?

By Kyriba

Spreadsheets continue to play an integral role in the retail sector, holding sensitive financial data to support critical business decisions; and yet isn’t it perplexing that some organisations fail to recognise their limitations and to apply the same security standards as with any other financial software?

We sit down with Rob Crowe, Strategic Accounts Manager at Kyriba, to discuss precisely what those limitations are and why spreadsheets are no longer enough for the retail sector.

With over 20 years’ experience in Treasury and having recently joined Kyriba with a remit to focus on this sector, what would you say are the key challenges for retailers?

The retail sector in many ways is blighted by the same cash management challenges as any other; often struggling to gain full control and visibility of whether the company’s Group-wide cash is in the right place at the right time…

Many retailers are embarking on a digital transformation journey as they recognise the importance of improving the supply chain. For instance, it is generally characteristic that retailers hold surplus cash reserves since their forecasting processes are sub-optimal. This means it is particularly crucial to have a robust, secure and efficient procure-to-pay process in place to enhance external cash investment, since the surplus cash is not typically invested back into the business, used to pay down debt or invested at a higher yield.

So why are so many retailers still not leveraging state-of-the-art technology for this and instead rely on error-prone spreadsheets?

Spreadsheets are still widely used across practically all finance and treasury teams and certainly have their place. However, using them as your primary tool for mission-critical activities such as cash positioning and forecasting, FX hedging, financial position keeping, accounting and payments, exposes you to the risk of error and fraud. For example, consider the operational risk when a single loan requires separate entry input or macros linking to multiple worksheets such as loan inventory, cash position, cash forecast, accruals, hedge accounting, treasury reporting and payments…

A spreadsheet lacks audit controls and workflow approval to ensure integrity. We’ve seen many examples where incorrect formulas and missing data causes underfunding cash positions, accounting errors and missed payments. However, there is still a perception that spreadsheets are low cost which – given the manual processing involved (even if the data is captured correctly) – is a misconception considering the losses experienced when something goes wrong versus the productivity gains of an automated solution allowing for much better use of an educated treasury professionals’ time. For example, with Kyriba, organisations can achieve productivity gains of 70-80% and interest expense reduction of between 5% and 15% for their cash management activities.

What is the impact when something goes wrong?

It is often only when there is a problem or material loss that spreadsheet risk is addressed. Spreadsheets put everyone at risk. There are several high profile cases of companies hitting the news, leading to unwanted publicity and investigation as a result of spreadsheet error. Last year, a UK off-license chain went into administration when the first of its profit warnings was blamed on a spreadsheet arithmetic error made by a member of its finance team. The repercussions were clearly devastating for many employees. I recall reading that 17% of large UK businesses have suffered financial loss due to inefficient use of spreadsheets and I’m sure this is just the tip of the iceberg! *

“The omission of a minus sign cost Fidelity Magellan Fund around £1.6 billion ($2.45 billion) in 1995, and the British government’s botched efforts to assess bids for the West Coast Rail Line in 2012, estimated to have cost around £50 million ($76.6 million).”**

Previously I was an internal auditor often focused on having to investigate failed spreadsheet-based, manual processes leading to missing payments, a breach of treasury policy and financial accounts restatements. There was often a large consultancy cost to investigate these failed processes, which led to damaged treasurer reputations, or worse still dismissal.

At Kyriba we also see many projects initiated following internal audit and consultancy engagements exposing weak internal processes that organisations are required to fix. We’d prefer to help organisations before they are forced to act.

So, how can you help retailers get unstuck from the spreadsheet mud?

Instead of logging into multiple bank portals to get your cash-position, and manually uploading and downloading data, this can be automated with dedicated treasury technology like Kyriba. By automating tasks that would traditionally take days, we can in minutes provide the visibility and reporting needed to optimise cash returns, control bank accounts, drive reporting and compliance, and manage liquidity. It frees up valuable time to focus on more strategic tasks, while protecting against the risk of human error and compromised security. From the retailers I’ve spoken to, some two-thirds still rely on spreadsheets, so there is clearly a lot of scope for treasury and finance to add better value to the organisation, in more ways than one…..

*YouGov Plc Poll, 2015

**Spreadsheet blunders costing business billions Katrina Bishop | @KatrinaBishop https://www.cnbc.com/id/100923538