We are at an age where disruption is the new trend. To be able to stay ahead of bolder, disruptive market players, entrepreneurs must also be ahead of the innovation curve, and that applies to every aspect of the business, including financial planning.
Some players in the market, however, choose to tread the beaten path where financial planning is involved and stick to spreadsheets.
While it’s true that without spreadsheets, the global financial market would not reach the same level of advancement, a mistake in the use of traditional methods of financial planning can lead to expensive mistakes amounting to billions of dollars – or maybe even the financial crash of an entire economy.
The Case of JP Morgan Chase
In 2012, some pretty standard Excel flaws in a spreadsheet JP Morgan used to model risk caused the company to erroneously declare $6 billion in losses, on top of $600 million in fines. The debacle, as outlined in the company’s 129-page report, stemmed from a combination of copy-paste errors and a faulty equation they used to crunch the numbers.
The warning derived from the fiasco was that, with Excel, a little oversight could make a painfully expensive mistake. Users need to be extra vigilant and to adopt risk management procedures that will protect the company in the event such predicament takes place.
The Shift to Digital
Learning from this rather avoidable error, smart companies started to transition from spreadsheet to automated financial planning tools.
Providers of intelligent, adaptive financial management solutions such as Budgeta.com, for instance, take advantage of cloud solutions to streamline processes in a company’s entire financial spectrum. It is helpful in creating budget models, as well as allows real-time data analysis and forecast.
Today’s sophisticated financial planning tools help companies simulate their financial future and predict variability in market returns, which in turn assist them to make sound financial decisions. As these automated tools are specially designed to create fewer to zero mistakes, entrepreneurs can avoid compromising data that translate to a massive financial loss.