This is a true story from a local B2B parts distributor told to us by the CEO. The company has 150 employees and has around 200+ customers who regularly order parts. A price quote is determined for each order using an Excel spreadsheet.
The number of orders and dollar volume in 2010 were similar to 2009, but the profit was much lower. Much thought was given to why the profit dropped, but no root cause was established. The same amount of business was done in 2011, but the company incurred a significant loss and had to cut costs in many areas in order stay viable. The company’s survival was now threatened.
A management consultant was brought in from the outside to analyze the cost areas and recommend improvements. The consultant examined how the company quoted the price for the orders, and discovered that the spreadsheet used to produce the quote was not being used consistently. Some of the sales reps had modified some formulas for one-off orders, and then re-used the spreadsheet for the standard orders. These spreadsheets proliferated within the company and some very large orders were under-priced because the wrong spreadsheet was used to develop the quote.
Such a simple mistake cost the company several hundred thousand dollars in lost profit and almost sank the company. Steps were taken to standardize the spreadsheets and an extra step was added to double check the quotes using the “master quotation spreadsheet.” If you are concerned about danger lurking in your Excel files, see our Excel Consulting page and get in touch with us.