Property developers and project managers are tasked with handling complex calculations, extensive data sets, and multifaceted project details.
For many, spreadsheets have long been the go-to tool for managing this, but as the scope and complexity of development projects have grown, the limitations and dangers of relying on spreadsheets have become increasingly apparent.
In this article, we’ll explore the risks associated with using spreadsheets in housing development and highlight how specialised software solutions can offer a more secure, efficient, and accurate alternative.
Before we look at the many ways in which spreadsheets can fail, here are a few well-known incidents highlighting why they are not worth the risk, especially when it comes to financial operations.
The use of spreadsheets played its part in this incident, along with cutting corners. JP Morgan was developing a new Value at Risk (VaR) model which operated via a series of Excel spreadsheets. The sheets had to be completed manually through copying and pasting data amongst them.
Due to errors in this process, volatility appeared lower than it should have; in addition, time pressures meant that the model didn’t go through the correct review procedure and wasn’t tested properly.
Given the current pressures on developers and housing associations to get building, it’s better to have purpose-built property development appraisal software – instead of rushing calculations and relying on inaccurate processes like this.
Two junior lawyers cost Barclays millions just by erroneously reformatting an Excel sheet and converting it to a PDF. It turned out that there was a hidden column, and what did it contain? 179 contracts representing Lehman Brothers trading positions that the bank never intended to buy (but couldn’t pull out of).
A copy and paste error in Excel was also to blame for this loss, in which major Canadian power generator, TransAlta, bought more US power transmission hedging contracts at higher prices than it should have.
In 2010, two Harvard economists used spreadsheets for the calculations underpinning their theory on the sustainability of debt. The theory became popular and had been cited by experts in major publications. However, a critical error was discovered in the calculations, undermining the theory.
While spreadsheets are versatile tools that can handle a variety of tasks, from simple data organisation to complex financial modelling, it’s estimated that 88% of them contain errors. Below, we’ll explore some of the key risks associated with using spreadsheets for housing development.
Human error is one of the most significant risks – and one of the most common (it accounts for most of that 88%). Even minor mistakes in data entry or formula configuration can lead to substantial inaccuracies. A misplaced decimal point or an incorrect cell reference can skew financial projections and valuations, leading to costly misjudgements.
Whatever the cause of an error, there’s a good chance nobody will ever know about it – until it’s too late and everyone is trying to find out what went wrong. Of course, this not only affects financials but wastes a great deal of time when it comes to investigating what happened.
As housing projects grow in size and complexity, managing them with spreadsheets becomes increasingly unwieldy.
Spreadsheets are not designed to handle the interconnected data and extensive project details typical of large-scale developments; trying to use them for this purpose can result in cumbersome, error-prone files that are difficult to update and maintain.
Spreadsheets often lack robust version control mechanisms. This can lead to confusion and discrepancies when multiple team members are working on the same file. Without a clear record of changes and updates, it’s easy for errors to go unnoticed and propagate through the project.
When different team members maintain separate spreadsheets or use varied data sources, inconsistencies can arise. This can result in conflicting information and hinder effective decision-making.
Ensuring data consistency across all project facets is challenging when relying on spreadsheets, especially since they don’t integrate well with other systems.
Spreadsheets are susceptible to data corruption, whether due to software issues, hardware failures, or accidental deletions. Recovering lost or corrupted data can be challenging and time-consuming.
Security is a critical concern in housing development, where financial data, project plans, and proprietary information are at stake. Spreadsheets, unfortunately, offer limited security features, making them vulnerable to several risks:
Most people don’t undergo thorough training for any spreadsheet software. This is partly because there aren’t really any best practises for all of their many use-cases, and many people only need to use their basic functionality.
While this likely contributes to the high rate of human error, it also introduces variability; people do things in different ways, and this makes the user experience frustrating when more than one person needs to work from a given document.
Even seasoned professionals can fall victim to spreadsheet errors. Here are some more common mistakes that can have significant repercussions.
A simple typo in a formula can lead to vastly erroneous calculations. How much time do you want to spend checking if the calculation was correct? Why not use purpose-built housing software that is guaranteed to have the correct formulas – formulas that cannot be changed when your employee’s cat walks over the keyboard?
Spreadsheets that pull data from external sources or other files are prone to broken links. If the source file is moved, renamed, or deleted, the data connection is severed, leading to incomplete or inaccurate information.
In collaborative environments, it’s easy for one team member (or their cat) to overwrite another’s data accidentally. Without proper controls, valuable information can be lost, and errors can multiply.
Important data can sometimes be hidden inadvertently or deliberately in spreadsheets – as with the JP Morgan incident. If these hidden cells are not accounted for, it can lead to incomplete analyses and faulty conclusions.
When you create new tabs within a sheet, the programme can’t see the connections in the data amongst those different tabs. Additional configuration or scripting is required in order to overcome this – otherwise, important data will be overlooked.
A blank cell does not represent a zero. The computer interprets a blank cell as a null value – as opposed to actual data. This misclassification can affect the accuracy of calculations.
Certain formatting tactics such as merging cells can compromise the integrity of the sheet. While it may make things more readable to humans, it has the opposite effect on computers; it runs the risk that the programme will not be able to read associations in the data.
These are just a handful of the potential pitfalls that spreadsheet users need to be aware of. Thankfully, there’s no need to know and mitigate all of the risks, as there is simply a better option – specialised software.
Given the limitations and risks of using spreadsheets, specialised solutions offer a superior alternative. They include:
Here are some key advantages.
Specialised software comes with comprehensive features designed to handle the complexities of housing development with precision. Automated calculations, standardised templates, and integrated data sources ensure accuracy and consistency across all aspects of the project.
For example, our property development appraisal software calculates and forecasts the likes of NPV, IRR, and long-term cash flow up to 100 years. It’s also highly flexible, allocating costs by tenure type, floor area, and so on. Whatever you need to calculate, it’s all possible quickly and easily, at the click of a button – no need to fuss over cells and formulas.
Its other core features include:
Our land appraisal software is just as convenient, accounting for as many variables as you need in your calculations and helping you make accurate decisions.
Unlike spreadsheets, specialised property development software can easily scale to accommodate large, complex projects, enabling the seamless management of extensive datasets and interconnected project details.
This is vital when it comes to managing the build phase. Sequel – our property development project management platform – takes care of that.
Version control mechanisms are yet another advantage that software offers over spreadsheets. With all team members working with the most up-to-date information, the risk of discrepancies is vastly reduced – and if you use cloud based rather than legacy software, you can rest assured that the risk of data loss will be a thing of the past.
Advanced security features are embedded in housing software solutions, including encryption and access controls, protecting sensitive data from unauthorised access.
Software streamlines workflows by automating routine tasks, improving document management, and providing real-time updates. This enhances efficiency, provides real time visibility, and allows team members to focus on strategy and decision-making – instead of admin.
Software provides powerful reporting and analysis tools, enabling housing developers to gain deeper insights into project performance, financial metrics, and more.
On the contrary, spreadsheets are limited in their ability to find patterns within their data – especially when users make the errors discussed above such as using separate tabs and not ensuring they’re connected.
The comprehensive audit trail that our software provides also makes compliance much easier; in the case of spreadsheets, the risk of non-compliance is high.
While spreadsheets have long been a staple tool in housing development, their limitations and risks pose a threat to the integrity of projects.
Human error, lack of scalability, version control issues, data inconsistencies, and security vulnerabilities make spreadsheets an inadequate solution for managing complex housing projects.
Specialised property development software offers a more secure, efficient, and accurate alternative, helping developers and project managers handle numerous tasks with the ultimate efficiency.
To learn more about our solutions and consultancy services – or to request a demo – contact us today.