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Enhancing Business Efficiency: The Power and Risks of Spreadsheet Usage

Spreadsheets have become integral to business operations, empowering users to conduct analyses without relying on overworked IT departments. Their ease of use and flexibility allow anyone to create tools for critical business processes, often leading to analyses performed by amateurs with little oversight. This article discusses the essential criteria for effective spreadsheet design, including accuracy, clarity, and testing. It emphasizes the importance of structuring spreadsheets properly and provides tips on maintaining readability and ensuring validity in financial models and data.

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Enhancing Business Efficiency: The Power and Risks of Spreadsheet Usage

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  1. Spreadsheets and Business

  2. Why the popularity of spreadsheets? • “End user Computing” • Long delays for IS department to do analysis and reports • Ease-to-use, powerful software • No need to wait for that overworked professional programmer • Now - anyone can write software to do business analyses

  3. There’s the Rub……. • Critical business analyses is being done by amateurs • Think about …. How dependent business is on spreadsheets and How little validitychecking is actually done! James A. Cummings, Inc >>>

  4. Criteria for good spreadsheet design • Accuracy • testing • Data entry controls to limit errors • Clarity • Easily understood by • creator • other users • Flexibility • Easily adapted • Remains valid

  5. Conceptual Model for Worksheet Layout • Input - Process - Output • Clearly separate Input from Output • Clearly specify Assumptions • To be more specific …………………...

  6. Desirable to have separate areas for: • Identification Area • Input Area • Assumptions / Definitions / Formulas • Work Area • Output Area • Macros (may not have them all in every sheet.) AMORT_TABLE.XLS >>

  7. Tips • Break lengthy formulas into parts • Easily hidden later • Use Functions Rather than Formulas • Use Labels, Shading, Lines, Color • anything to enhance readability • But don’t confuse • Form over Function • Aesthetics over Accuracy Cummings (2) >>>

  8. Tips • Clearly specify units of measure • No Numbers In Formulas • All placed in separate cells and referenced • Annotate Often • Document (i.e. Write It Down) • Assumptions • Formulas No_5 template >>>>>

  9. Tips • Get familiar with the Auditing Toolbar • precedents • dependents • Trace Error Auditing Toolbar >>>>>

  10. Testing • Accuracy of Worksheet • test with simple and predictable data • Full range of values • Independent Verification • Another set of eyes • A known test problem • Ad Hoc Testing - Whenever using a spreadsheet • The ‘eyeball’ test

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