Page 112 - Budgeting for Managers

Checking It Twice
numbers. In this case, the monthly figures were calculated by
dividing the annual figures by 12. When the display was adjust-
ed to show cents, the rounding error was hidden.
We can solve this problem with the ROUND() command,
which was used in columns B1 and B2. When we use the 95
ROUND() command, the spreadsheet program automatically
rounds the figure to the correct decimal place. For instance,
950/12 = 79.16666. But ROUND((950/12),2) = 79.17, an
amount in exact cents. We illustrate this by showing columns
A2 and B2 with four decimal places.
This may be a small error, but the simple fact that it is
wrong can create a lot of embarrassment. In this case, Eric,
who has a degree in accounting and an MBA, created the
spreadsheet. Then I checked it (and missed the error). Our
proofreader, a college student, caught it for us. Being smart
doesn’t keep us from making mistakes or making bad assump-
tions. Remember: spreadsheet errors are hard to find. We don’t
see the formulas, so we can’t see if they’re wrong.
Spreadsheets can also have very large errors that are hard
to find. Here is a common way to create a faulty spreadsheet: If

But They Were Never Right in the First Place
A number of years ago, a large corporation decided to shift
entirely away from the Lotus 1-2-3 spreadsheet program to
Microsoft Excel. One department resisted for over three years.That
department had built huge estimation tables in Lotus 1-2-3 and said
that it would be too difficult to redo all of the spreadsheets in Excel
and that errors were sure to creep in. Finally, the corporate executives
hired a team of analysts to convert the spreadsheets.They discovered
that there were so many errors in the Lotus 1-2-3 spreadsheets that
they were really useless. Over the years, people had added rows and
columns without carefully checking to see if the formulas were right
or wrong.The department had been defending a set of spreadsheets
that really didn’t work at all.The analysts corrected the errors as they
built the new spreadsheets in Excel.
Let’s not defend our spreadsheets; let’s check them and make sure
they’re right!