Why finance never left Excel

Finance has bought a lot of software. ERPs run the ledger, BI tools report from it, and planning systems promise to hold the budget. Yet in most teams the budget, the forecast and the answer to the CFO’s latest question still live in Excel. So why does finance still use Excel? The research has a better answer than habit.

This page is part of the research behind In defence of Excel, the first post in our series Spreadsheets: love & limits. It gathers what finance, accounting and information-systems researchers have found: how widespread spreadsheets are in finance, why the budget stays in them, how they organise a finance team, and why analysts keep them alongside the ERP. Several of these studies were written mainly to warn about spreadsheet risk; we use only what they found about use and importance.

How widespread are spreadsheets in finance?

The evidence comes from trading floors, a subpoenaed email archive, large surveys of spreadsheet users and one company’s shared drive. It all points the same way.

The City of London

In 2005 G. J. Croll ran 23 half-hour telephone interviews with auditors, bankers, actuaries, lawyers, regulators and others in significant roles in the City of London. The City then supported about 317,000 financial jobs, and Croll estimated that up to 30% of them worked with spreadsheets that were important, key or critical. That is his estimate, not a count, but his sources explain it. One of them summed it up:

“Excel is everywhere - it is the primary front-line tool of analysis in the financial business. Most traders price deals in spreadsheets and enter them in large-scale deal capture systems afterwards”

Trading and banking interviewees told him “The whole industry is run on a spreadsheet” and “Spreadsheets are the user interface into the deal”. For some specialist or complex transactions, “the spreadsheet will remain the prime record”. Croll concluded that “it is impossible to imagine the City of London operating without the widespread use of large spreadsheets”. For FP&A the familiar part is the order of work: build the analysis in the spreadsheet, then post the result to the system of record. That isn’t a quirk of planning teams. It’s how the front office of global finance works.

Enron’s inbox

Enron’s email archive was obtained “by subpoena rather than voluntarily”, which is why the researchers who analysed its spreadsheets in 2015 called it “an accurate depiction of a slice of the information industry”. Of 717,102 emails from about August 2000 to December 2001, 6.2% carried a spreadsheet, about a hundred a day, and 9.6% sent or mentioned one. The examples are recognisable: a trader job advert that listed “Advanced Excel spreadsheet skills” as essential and trading experience as only “a plus”, and a draft “2002 Corporate Allocations spreadsheet” with columns for Plan 2001, Actual YTD 2001 and Plan 2002. The workbook wasn’t a private calculator. It was how work moved round the company.

Surveys of spreadsheet users

The largest early survey came from the Spreadsheet Engineering Research Project (SERP) at Dartmouth’s Tuck School: 1,597 users reached through seven organisations in 2005 and 2006 (a project report, not peer-reviewed). Finance was the biggest group, at 30.2%. Nearly half (49.0%) said spreadsheets were critical to their job, and 82.6% said critical or very important. The top uses were analysing financial or operational data (87.6%), “Determining trends and making projections” (54.8%) and tracking data such as budgets (47.2%).

A peer-reviewed analysis of the same programme, published in 2009, found that only 11.5% built spreadsheets purely for their own use. 15.7% said their spreadsheets “often become permanent assets” for the organisation, rising to 47.3% among the most expert users. Anyone who has inherited a planning model will recognise the pattern: built by one person, then kept by the organisation.

Inside a 135,000-person conglomerate

At ABB in 2016, a group of about 135,000 people with about 5,000 traditional software developers, spreadsheet users were “certainly in the tens of thousands”. Researchers found more than 300,000 spreadsheet files on one internal shared drive. In their survey, finance was the largest named group, and 20 of the 34 people who spent more than 20 hours a week in spreadsheets were in finance.

Mission-critical, and mostly unseen

Information-systems researchers agree. In 2007 Grossman, Mehrotra and Özlük described eighteen mission-critical spreadsheets, meaning ones the business depends on to operate, and found that “Spreadsheets are an effective application development platform”. In 2012 Panko and Port compared end-user computing, the software people build for themselves outside the IT department, to dark matter: “enormous in quantity and importance”, yet “largely invisible to corporate IT departments”.

Why does the budget stay in Excel?

Budgets and forecasts sit near the top of the uses above. The current practitioner figure comes from AFP: in its autumn 2024 survey of 362 FP&A practitioners, 96% planned in spreadsheets daily or weekly, although 71% also used dedicated planning tools. We cover that survey in Excel in FP&A, by the numbers. The question here is why.

Inside the budget cycle, 1990

The clearest answer is one of the oldest. Around 1990 Bonnie Nardi and James Miller ran an ethnographic study of spreadsheet users, which meant long interviews about the work people actually did. One of them, Ray, managed a finance department for a large corporation and used spreadsheets “to plan budget allocations across several different departments, to track departmental expenses and headcounts, and to forecast future budgetary needs”. Another, Laura, was a controller responsible for the annual budget. Her manager, Jeremy, was the CFO.

“Spreadsheets provide a foundation for thinking about different aspects of the budgeting process and for controlling budgeting activity. In the annual ‘Budget Estimates’ spreadsheet that Laura is responsible for, many critical data values are based on assumptions about product sales, costs of production, headcounts, and other variables that must be estimated accurately”

Because so much rested on guesswork, Laura drew on Jeremy’s experience through the file itself. He “literally takes her spreadsheet and makes changes directly to the model”, and “the model emerged in successive approximations as Laura and Jeremy passed it back and forth for incremental refinement”. Ray issued “targeting templates” to standardise expense targets across departments, and “Each staff member builds the spreadsheet for his or her area on top of the template”. Filling them in, the researchers stressed, meant “doing more than ‘data entry’”.

That is the budget cycle most FP&A teams still run: a central template, local estimates that need judgement, and a CFO who edits the model directly. Even then, the spreadsheet was both the thinking tool and the control device.

What employers and professional bodies expect

In a 2015 study, CFOs and their staff at some of New Zealand’s largest firms said they wanted management-accounting graduates with intermediate proficiency in Excel, Word, PowerPoint and Outlook, and enough familiarity with an ERP to process transactions such as accounts receivable. “Of those requirements, Excel for analysis was the most important.” The ERP handles the transactions. Excel handles the analysis. ICAEW’s Spreadsheet Competency Framework describes industry accountants’ roles as ranging “from preparing budgets and forecasts to analysing datasets from various internal systems”, and says that “corporate decisions are frequently driven directly by spreadsheet outputs”.

What budgeting research leaves out

Budgets aren’t going away. The leading academic study of North American budgeting practice, published in 2010 and based on two surveys of mid- to large-sized organisations, found that for most firms budgets “continue to be used for control purposes and are perceived to be value-added”. It never mentions spreadsheets or Excel. Academic budgeting research has largely ignored the tool the budget is built in, which is why the prevalence evidence comes from AFP, ICAEW and studies of spreadsheets themselves.

A shared language that finance owns

The spreadsheet also organises how finance works, with itself and with everyone else. In 1990 Nardi and Miller pushed back against “the common view of spreadsheets as ‘single-user’ programs”. They found that “nearly all of the spreadsheets used in the work environments studied were the result of collaborative work by people with different levels of programming and domain expertise”. Their 1991 journal article explained why the grid works so well as a shared medium:

“The shared semantics of the table facilitate knowledge transfer between co-workers; the very structure of the rows, columns and cells of the table transmits a great deal of information”

Users could “understand and interpret each other’s models with relative ease”, which is why a budget file can pass between a controller, a CFO and the department heads without a manual. The grid also keeps the logic with the people who know the business. In Nardi and Miller’s words, “what has made spreadsheets so successful is putting computational power into the hands of domain experts”, and problem solving “is handled locally, without requiring the intervention of personnel from other work groups”.

The model as a contract

Beyond the finance team, the model becomes the thing everyone works from. Croll found that “market participants are controlled at a strategic level by senior personnel using spreadsheet models”. In the UK’s Private Finance Initiative (PFI) infrastructure projects, which made up about 12% of government capital spending, the model was part of the deal. “The financial model” was a defined term in the legal agreements, which “specify what the financial model must do, who is responsible for it and how often it should be run or re-run over the 20-30 year project life”.

So a model can be the agreed statement of the business that bankers, lawyers, sponsors and government all work from. Organisation researchers call things like this boundary objects: objects that different groups work from while each reads them in its own terms. Applying the label to spreadsheets is our reading of these studies. No study we found uses it.

Finance keeps its own tools

Ownership has a professional side too. Newman and Westrup’s 2005 study of UK management accountants found that accountants “continue to use their position to reshape their professional expertise wherever possible”, and warned that “neglect in this area allows other groups to wrest control from management accountants and make ERPs work for themselves”. Who controls the model is a question of professional jurisdiction, not IT housekeeping.

Why do analysts keep spreadsheets alongside the ERP?

In 2003 Scapens and Jazayeri wrote that the field studies then appearing suggested ERP systems were “having only a relatively moderate impact on the character of management accounting and the work of management accountants”. What changed was the job: routine work disappeared and the role became more forward-looking. A 2012 study of controllers at 13 major Canadian firms found that “Management accountants are less involved with data entry, thus allowing them to undertake more analyses”. ERP took over the transactions and freed finance to analyse. It didn’t take over the analysis, and the New Zealand CFOs above tell us where that happens.

A manufacturer’s budget, 2023

The most direct evidence is a 2023 case study by Weerasekara and Gooneratne of a Sri Lankan manufacturer that runs its transactions on a large ERP. Its short-term rolling estimates “are altered in keeping with the external environment changes”, and interviewees said the diversity of factors involved was the main barrier to moving budgeting fully into the ERP. An executive in management accounting, citing COVID, said: “The market is very volatile.” And: “When there are many unpredictable changes, it’s more convenient to make changes to excel sheets” than to the ERP. A second executive gave the example every forecaster will recognise:

“We need to adjust the budget according to the changes in the external environment. For example, with the lockdown, we had to adjust the sales forecast for the next months”

Another interviewee sometimes prepares “a separate excel sheet to confirm the numbers, as we should not just depend on one system”. That is a control, not a lack of trust. The study is fair about what moved the other way. Internal reporting left the spreadsheet (“Now we use ERP for such internal reporting”), and the ERP’s budget tools “helped the firm streamline budgeting”. The split is the one most of us would draw. Standard, stable reporting goes into the system. Volatile planning that depends on judgement stays in the spreadsheet.

Shadow systems: why side models survive the ERP

Information-systems researchers call the tools departments build next to the official system shadow systems: systems that “replicate in full or in part data and/or functionality of the legitimate systems of the organization”. Behrens and Sedera studied them at Central Queensland University after its 2001 ERP go-live. The shadow systems they found (a personal tracker, a reporting tool and a web portal) aren’t described as spreadsheets, but the reasons will sound familiar. On speed, a change request “can take six month,s [sic] a year or never”. On fit, the ERP was “geared for online transaction processing which doesn’t suit [our requirements]”. On control, “They want to have control of things”.

The authors saw a gap between what stakeholders needed and “what the ERP system implementation provided”. The shadow system filled it:

“Although shadow systems are generally seen in a negative light, wasting resources and duplicating effort they also offer advantages allowing individuals to achieve more positive work outcomes. These outcomes may be a more effective and efficient solution to what may be available in the main system”

Other studies agree. An eight-year case study found that “shadow systems may be useful indicators of a range of problems with enterprise system implementation”. At a large government-owned corporation, a rigid ERP gave rise to “feral systems” that staff used “to complete important work”. For spreadsheets specifically, Grossman’s team found that “Sophisticated programmers sometimes choose spreadsheets over other languages”, and Croll heard from the markets that “if a customer wants to do a bespoke trade that cannot be handled in our designated booking system then we have to book it in a spreadsheet”.

Put side by side, the studies on this page give five reasons finance keeps spreadsheets next to its other systems:

• Flexibility when conditions are volatile, as at the manufacturer that couldn’t keep its budget in the ERP.
• Fit for non-standard work, such as the bespoke trade or the report the system doesn’t produce.
• Speed, with no change request and no six-month queue.
• Control and ownership, including finance’s claim to its own expertise.
• An independent check on the numbers the system produces.

Line up the dates and the arrangement looks stable rather than transitional: a moderate ERP impact in the early 2000s, shadow systems persisting after go-live in 2004, and 96% of FP&A practitioners still planning in spreadsheets daily or weekly in 2024. That is our reading, not a measured result, since no study has followed the same teams over time. The research carries a fair warning too. Grossman’s team called spreadsheets a source of “accidental legacy systems”, which is where the next post in the series picks up.

What the evidence doesn’t show

No large-sample study has asked finance people why they keep spreadsheets alongside their ERP or BI tools and had them rate the reasons. The “why” rests on case studies and interviews, set next to surveys that measure use, and the university’s shadow systems apply to Excel only by analogy.

The usage samples aren’t representative either. The Tuck respondents came from software mailing lists, MBA alumni and three companies, ABB is one company, and the Enron emails are from 2000 and 2001. We found no large academic survey of spreadsheet use in finance functions since 2017, and no peer-reviewed survey of what share of companies budget in spreadsheets. Organization Science published a close study of PowerPoint in strategy work in 2011; we found no equivalent for Excel in budgeting. What convinces is the consistency: very different samples, across three decades, keep finding the same thing.

The research turns “habit” into something more precise: a shared language for the budget, a tool finance owns, and a way to keep the plan moving when the world won’t sit still. That is the argument of In defence of Excel. For how much finance relies on spreadsheets today, see Excel in FP&A, by the numbers. For why the grid suits the way modellers think, see Why the grid fits how we think.