The Hidden Risk of Spreadsheet Errors in Your Business — and How to Prevent Them

Imprisoned by Your Own Cells

Spreadsheets are the backbone of decision-making in countless organisations—from calculating financial projections to tracking customer orders, inventory, payroll, and everything in between. But here's a fun fact - research shows that 88% of spreadsheets contain errors!

These aren't just minor typos or formatting issues. In many cases, they're critical errors that can lead to poor decisions, regulatory breaches, or massive financial losses. Most businesses don't even know these errors exist until it's too late. Sometimes a tiny mistake can have major consequences, in 2012, JP Morgan lost $6B due to a copying error in Excel!

A simple spreadsheet error at Kodak led to an $11 million overstatement in severance... for just one lucky employee. It's unclear what happened to the person who made the mistake, but their own severance was likely far less generous.

So... Why is this still happening in 2025? Mostly because spreadsheets are often developed without formal processes, tested by their creators, albeit, never reviewed by others. Crucially they evolve over time with little documentation and bandaids covering old wounds. They become essential tools... Yet sit quietly in the background, trusted without question.

In this article, we'll uncover just how dangerous spreadsheet errors can be, why they're so common, and what your business can do to avoid the hidden risks before they spiral out of control.

Why Spreadsheet Errors Are So Common

Spreadsheets are incredibly powerful tools, but they're also incredibly easy to get wrong. One reason they're so prone to error, to put it bluntly, is that the barrier to entry is low... Anyone with a computer can start building formulas, pivot tables, and dashboards. But without proper training, most people rely on guesswork, trial and error, or copying formulas from other spreadsheets without fully understanding them.

Over time, as the spreadsheets evolve, what started as a simple calculation grows into a sprawling file with dozens of interlinked tabs, hidden assumptions, and outdated logic. Often, there's no clear documentation, naming conventions, or guidance for future users. As a result, changes made months or years prior become a ticking time bomb, at this point, no one remembers how the spreadsheet even works.

Unlike software development, spreadsheets rarely use version control or audit trails. There's no way to see who changed what, when, or why. Mistakes can be made and overwritten without anyone noticing.

Most commonly, many businesses rely on a single "Excel champion"—a team member who understands the system inside and out. But when that person leaves or changes roles, the organisation is left with a mysterious entity, a labyrinth of hidden functions and formulas of unknown origin, nor use case. Even well-meaning replacements may struggle to untangle the logic, starting all over again might be unrealistic, so its guess work and bandaid time again.

These conditions make even simple spreadsheets vulnerable to silent, compounding errors. Consider the case of the University of Toledo, where a single formula mistake led to a $2.4 million misprojection in tuition revenue. Or the Emerson Construction Company, who nearly lost a $37 million government contract due to overlooking a single cell in their bid estimate.

Signs You Might Have a Spreadsheet Problem

Spreadsheet issues often go unnoticed until they trigger a crisis. But with a bit of awareness, it's possible to spot the red flags early and take corrective action. Here are some telltale signs that your organisation might have a spreadsheet problem:

• Broken links or #REF errors: These are not just technical annoyances—they often signal broken logic, missing data, or structural flaws in how spreadsheets are built and maintained.
• Single point of failure: If there's only one person who truly understands how a spreadsheet works, that's a major risk. What happens if they go on leave or leave the business altogether?
• Unreviewed critical decisions: Are you using Excel files to make budgeting, staffing, or compliance decisions without a second set of eyes? Lack of peer review opens the door to costly mistakes.
• Performance issues: Does the file take ages to open or update? That's often a sign of bloated formulas, inefficient design, or hidden data issues.

If any of these points sound familiar, it's time for a thorough audit, or even a professional spreadsheet health check.

How to Prevent Costly Spreadsheet Errors

So that's the bad news, the good news is that spreadsheet errors are preventable—with the right structure, tools, and mindset. Here are some strategies to reduce your risk and improve accuracy in your next project:

• Implement consistent naming conventions and data validation: A standardised naming system helps others (and future you!) understand spreadsheet logic quickly.
• Lock sensitive cells and protect critical formulas: Prevent accidental overwrites by locking down the most important formulas and reference cells.
• Use Excel's built-in auditing tools: Excel offers advanced tools like the Formula Auditing toolbar, Error Checking, and Trace Precedents/Dependents.
• Automate and document recurring tasks: If you run the same report every week or reconcile data monthly? Automate the workflow with Power Query, VBA, or scripts.
• Schedule regular spreadsheet audits: Just like financial audits, spreadsheet audits can identify hidden errors, inefficiencies, and risks.

Conclusion

Spreadsheet errors are far more common than most businesses realise—and the consequences can be severe. From minor reporting mistakes to multi-million-dollar losses, the risks are real, persistent, and often hidden in plain sight.

But these risks are not inevitable. With the right practices, tools, and expert guidance, they can be dramatically reduced or even eliminated. If there is one thing to take from this article it is that Prevention is ALWAYS better then the cure. A solid foundation in your spreadsheet design can really future proof your documents and streamline your business.

About the Author

Daniel is a developer at Excel Experts, a curious mind into the world of programming, design and SEO. If you have any questions, please feel free to get in contact via the form below.