i-nth - Are spreadsheet errors undermining decision-making in your organization?

Authors

Jonathan P. Caulkins, Erika Layne Morrison, & Timothy Weidemann

Your spreadsheets may be disasters in the making, as a new study makes clear.

Here's what to do. Strive for spreadsheets that are validated, reliable, and auditable.

Quality control in the real world means:

Look at the decision the spreadsheet is designed to inform. What's the impact of the decision? Will inaccuracy damage your credibility?
Look at the spreadsheet itself. A large or complex spreadsheet is more likely to have errors.
Provide a yardstick. Give employees guidelines to help them decide whether their spreadsheet needs more quality-control steps.
Offer training. Find training which focuses on the principles of good design, rather than simply teaching more advanced features.
Foster a culture of quality. Encourage good spreadsheet design, offer staff training on error reduction strategies, and insist on a full peer review of high-priority spreadsheets.

Guidelines for building more reliable spreadsheets:

Design separate sections for data and calculations. "Modules" of information should be separated: data in one place, calculations in another. Then data can be easily updated and calculations reviewed for accuracy. Data should be entered only once and then referenced through formulas.
Break long formulas into small, digestible pieces. It's easier for reviewers to follow formulas that are short, with inputs located close together on the spreadsheet.
Include documentation. Even the developer may not understand the spreadsheet months later! Documentation assures that spreadsheets are organizational resources for shared decision-making.
Keep an audit log of changes and scenarios. Identify changes for reliability.
Implement version control. Don't overlook the basics, such as standardizing file-naming conventions.

2006, Nonprofit World, Volume 24, Number 3, May/June, pages 26-28