April 12, 2023
Spreadsheets are powerful and awesome.
81% percent of businesses use Microsoft Excel spreadsheets somewhere in their day-to-day operations.
They are a low-cost, high-value solution for nearly every data-centric business operation.
In the energy sector, spreadsheets are used for everything from compensation and monetization to ﬁnancials and full-scale tracking of commodities.
Energy providers have run entire gathering systems on spreadsheets, so they understand the complexity, ﬂexibility, and usability that spreadsheets can offer.
But spreadsheets also create issues...
Let’s consider some of the limitations that spreadsheets bring to the management of large transactional gas systems and the business risks this can introduce.
Before we dive into why spreadsheets are a “problem,” let’s be clear: spreadsheets are incredibly valuable. We use them every day.
They still bring tremendous value to the modern energy company and there are areas where spreadsheets are a critical tool.
However, they’re not ideal for all situations.
Consider mission-critical energy transactions and pipeline management that can have a material impact on your ﬁnancials. Here are ten critical weaknesses that arise when using spreadsheets for such important tasks:
Lack of User Controls
Spreadsheets offer limited version controls, which can lead to awkward, review-heavy workﬂows that force users to backtrack and ﬁgure out exactly what the last person changed before adding new data.
The more complex the spreadsheet becomes, the more onerous this gets.
To compensate, many gas companies have appointed untitled “spreadsheet experts,” but when that person leaves, it throws a wrench in the entire system.
No good spreadsheet starts out complicated, but almost every valuable spreadsheet ends up complicated — especially in energy.
These sprawling, formula-intensive sheets become hard to navigate and once you reach that point, you’re in trouble.
A single data entry error becomes a headache-inducing effort to trace. Or worse, an incorrectly changed formula leads to a wrong number that impacts your company’s ﬁnancials.
Need to add a new location or business to your behemoth of a spreadsheet? Get ready to spend hours adding and verifying those new rows and columns without disturbing other calculations.
Again, this is a problem of scale. As spreadsheet complexity grows, so does the difﬁculty of managing it or making modifications.
While long-established spreadsheets might seem easier to manage by virtue of familiarity, density and complexity quickly make error-free management and updates a chore.
While the look of SaaS applications and data systems is quite standardized, spreadsheets deﬁnitely are not. Every company has its own unique-looking gas management spreadsheet.
This makes it challenging to onboard new employees and contractors, or to bringing auditors up to speed.
The financial risk—not to mention operational pain—associated with losing your one-and-only “spreadsheet expert” is non-trivial.
Combine variability with complexity and you get a not-so-delicious, barely auditable soup of formulas.
The speciﬁcs of SOX Section 404 and “critical” spreadsheets are beyond the scope of this post, but just imagine how difﬁcult it would be to accurately audit a spreadsheet that’s a one-of-a-kind piece of formula and lookup artwork.
Energy auditors are trained in basic Excel, but they are also increasingly insistent on seeing clear and easily digestible transactional management.
Auditors focus on things like change control, data validation, business controls, and user access—all of which are difﬁcult to manage when using a spreadsheet.
Many spreadsheets become a single system of record but except for custom-created applications and intricate, integration-heavy tech stacks, most aren’t automatically backed up.
This leaves spreadsheets ripe for deletion and corruption errors.
Across all industries, the average cost of losing a few records is in the tens of thousands of dollars. But energy sector spreadsheets are often used for complex transactions, not mere records.
One accidental deletion can cost you millions.
Cybersecurity is by far the weakest point of spreadsheets.
The only real data security built into spreadsheets is cell locking, which does little to protect your data.
Many businesses are under the misguided impression that Microsoft’s backend “global scale” security has them covered, but the fail-point for spreadsheets has always been direct access.
A third of all data breaches involve internal actors.
Not being able to track which user changed data or a formula is a very tangible risk.
The more valuable a spreadsheet becomes to your business, the greater the risk if it fails.
Spreadsheets don’t come with the same backups, data replication, or recovery time as a SaaS transaction system. More often, they are just one more ﬁle in the forest of directory trees on some network drive.
Your IT organization may not even realize the critical nature of a spreadsheet to your business operations.
A corrupted spreadsheet can leave your team using a week-old backup that takes days to restore.
How do you scale users, reporting, and functionality on a spreadsheet?
Here’s the easy answer: you don’t.
Well, technically, you might. But not without signiﬁcant time investments and a bottle of Tylenol.
Since most companies run on Microsoft Ofﬁce or Google Workspace, spreadsheets are essentially free. But that’s not completely accurate.
There’s a very real human cost to managing and maintaining spreadsheets.
Creating the spreadsheet, fixing data entry errors, tackling versioning issues, and performing upgrades and maintenance all take time and energy away from other activities.
Spreadsheets aren’t free. They have intangible costs that can be tricky to calculate.
Spreadsheets are burdensome to merge, difﬁcult to use when de-duplicating data, have no real built-in versioning controls, are challenging to scale, and are ripe for security incidents.
McKinsey estimates that digital transformation will cut energy operating expenses by up to 25% and produce 20-40% gains in safety, reliability, and regulatory compliance.
Within the energy ecosystem, price volatility, pipeline and grid complexity, and delivery challenges are all increasing.
So why do so many of us continue running our business on a spreadsheet?
Because it’s hard to move away from them, right?
We have to overcome our ever-present resistance to change, and we have to unravel these complicated beasts that we’ve been using for years.
For the same reasons that spreadsheets are risky, they’re hard to migrate away from.
Does your team have the people, time, and energy to make the change?
The idea might be floated during a budgeting cycle only to get deprioritized in favor of “more critical” business objectives.
Fortunately, migrating away from spreadsheets isn’t as difﬁcult as it seems.
It won’t happen in a day and, yes, it will require some effort, but the results are worth the effort.
In the spirit of “Don’t bring me problems, bring me solutions,” what does an alternative to spreadsheets look like?
Thinking specifically about the energy transaction space, here are six things to consider:
Business and Regulatory Requirements
Any alternative system must cover at least 80% of your business requirements and 100% of the compliance requirements.
Finding a single system that covers 100% of your business requirements is unlikely, but gaps can be filled through system integration (or even simpler spreadsheets!)
Although you’re trying to move away from spreadsheets, avoid investing in a system that doesn’t play nicely with them.
While that might sound counterintuitive, spreadsheets aren’t all bad. In fact, they’re necessary gap-ﬁllers.
Business requirements that your system can’t meet can be supplemented with spreadsheets, provided you limit the scope of those spreadsheets to minimize the risk of getting back into a complicated, unscalable, insecure situation.
Speed of Implementation
There is considerable confusion in the energy space about how long it takes to implement a transaction management system.
Since energy transactions are complex in nature, there’s a tendency to think that the corresponding management system must be equally complicated.
That need not be the case. Smaller companies can implement an effective ETMS just a couple of months.
Look for something that’s relatively quick to implement and then scale with your business.
Return on Investment
As a well-run business, you must justify whatever you spend on spreadsheet replacement.
However, recall that many of the costs associated with using spreadsheets are intangible.
Examine how often the spreadsheet has been modiﬁed to accommodate changes in the business, and the amount of effort required.
While upfront cost is important, don’t forget to also factor in risk and cost reduction associated with enhanced security, data integrity, and business continuity assurance.
Consider scalability from two perspectives: You need a system that will scale effectively as your business grows, and you need a system will adapt as technology and regulations evolve.
Choose a vendor with a culture for advancement, both functionally and technologically.
Don’t mess around with tech that isn’t updated regularly to accommodate the rapidly evolving energy landscape.
We’ve written elsewhere about the recent shift to mobile-ready applications. While high-bandwidth, enterprise-grade systems are key to unlocking value in the complicated energy space, we also recommend investing in a system that’s ﬂexible across platforms.
Give your team the ability to pull up their account on a smartphone at their kid’s soccer game, as well as on a powerful workstation.
IT and Audit Requirements
An increasing number of spreadsheets are showing up on auditors’ exception lists as they become wise to the risks that large, complicated spreadsheets can create.
Your system investment must deliver an audit-ready solution that meets all your existing IT and compliance requirements.
When we developed Trellis, a key consideration was delivering ease-of-use via an intuitive application. Part of the solution was to facilitate easy interactions with spreadsheets.
We wanted to create an end-to-end energy transaction management system that is hyper-secure, compliance-driven, and incredibly ﬂexible, scalable, and powerful, while ensuring that the transition from legacy spreadsheets was as painless as possible.
Trellis was designed to work with spreadsheets and other vertical systems and can help you cut costs while realizing the tangible value of digital transformation.
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