Feeds

Managing spreadsheet fraud

Do managers know how much errors cost?

  • alert
  • submit to reddit

The Essential Guide to IT Transformation

From time to time over the last year I have written and spoken about the dangers of using spreadsheets, particularly from the perspective of compliance but also with respect to how much they are error prone and subject to fraud.

However, the truth is that spreadsheets are beloved by managers the world over and nothing I or anyone else says or does will make any difference to that fact. So, if we have to live with spreadsheets then at least we should start by managing them. Since there seems to be very little written on the subject I have written my own white paper, which is available for free download.

Researching this white paper has taken more time that I had expected, most notably because there are all sorts of facilities in Excel (yes, this isn't the only spreadsheet but it is by far the most popular) that most of us don't know about. For example, there is password control in Excel. There is also some limited auditing capability. I wonder how many people actually know that? I wonder how many actually use these features?

The key point about spreadsheets is that you need to know which ones are critical to your business, which ones are merely important and which ones you do not have to bother too much about. Once you know that, you can start to apply appropriate policies depending on the criticality of the spreadsheet involved.

At the highest level (at least), spreadsheets should be treated as a corporate resource. For example, if you use spreadsheets for planning then you need to do everything you can to eliminate the possibility of error. And what do you do with corporate resources? You give them to the IT department which can implement proper testing and control procedures.

The real problem, of course, is that business managers don't know that there is a problem (actually, lots of problems) with spreadsheets, while IT regards spreadsheets as falling outside its jurisdiction. So spreadsheet management falls down a hole in the middle.

That has got to stop. According to both PricewaterhouseCoopers and KPMG, more than 90 per cent of corporate spreadsheets have material errors in them. Worse, estimates suggest that such errors costs between $10,000 and $100,000 per error per month. Let's take the Fortune 500 and let's suppose that each of these companies has just 10 (a pitifully small number) spreadsheets of corporate significance. Then nine have errors. Let's be circumspect and suppose that each has only one error and that it is spotted within three months (wildly optimistic); then each error costs $165,000 on average.

So how much money is the Fortune 500 wasting annually? It is a simple sum: $165,000 times 9 times 500. That amounts to just shy of three quarters of a billion dollars. And is that anywhere near realistic? No. It is probably safe to say that corporate America, for example, loses in excess of $10bn annually through the misuse and abuse of spreadsheets. That's a big number: it suggests a problem worth managing.

Copyright © 2005, IT-Director.com

Related stories

India acts on call centre fraud
Indian call centre staff nicked for fraud
Former PC tycoon jailed for fraud

Application security programs and practises

More from The Register

next story
Stick a 4K in them: Super high-res TVs are DONE
4,000 pixels is niche now... Don't say we didn't warn you
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
Philip K Dick 'Nazi alternate reality' story to be made into TV series
Amazon Studios, Ridley Scott firm to produce The Man in the High Castle
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
Bose says today is F*** With Dre Day: Beats sued in patent battle
Music gear giant seeks some of that sweet, sweet Apple pie
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
Too many IT conferences to cover? MICROSOFT to the RESCUE!
Yet more word of cuts emerges from Redmond
Joe Average isn't worth $10 a year to Mark Zuckerberg
The Social Network deflates the PC resurgence with mobile-only usage prediction
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Application security programs and practises
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Securing Web Applications Made Simple and Scalable
Learn how automated security testing can provide a simple and scalable way to protect your web applications.