Surprisingly it is still common practice across our industry for physical oil traders to use spreadsheets to manage multi-million dollar trades, even though the risks of losing data or corrupt files could have serious implications to your business.
There’s no doubt that spreadsheets are convenient, almost free and easy to use. Everybody uses them but they should be used judiciously and in a manner which does not hide issues.
As files grow in complexity to meet changing business demands, and as more and more people access the same data and files, the risks grow faster.
Just consider some of the practical risks of using spreadsheets:
• There is the possibility of input errors, duplication of effort, issues around file control, potential corruption of extremely important files, audit challenges and the fact management don’t have an easy-to-access, consolidated view of the business.
• Moreover increasingly auditors, banks and compliance managers want to see the business using systems for tracking the business rather than spreadsheets.
Add to these risks the operational challenges of having data stored across multiple files in multiple locations, together with the frustrations of not being able to quickly access the information you need to make the right business decisions, and it becomes clear you need to find alternative ways to manage and record physical oil trades.
So if spreadsheets aren’t a good business choice – what is?
There is a lot of specialist software on the market designed to make physical oil trading a lot easier and much more secure. Software that not only eliminates many of the risks you face using spreadsheets, but that also offers ways for you to drive improvements in operational efficiency and lower costs.
Such systems automate many of the manual tasks and so eliminate the potential errors likely to occur when using spreadsheets. They also deliver improved security, provide a consolidated view of the business, and so offer faster, more accurate reporting and better decision support via real-time data and analysis tools.
Specialist physical trading and operations software offers so much more, allowing you to:
• Real time Profit and Loss
• Dynamic pricing and mark to market calculations
• Capture all types of trades, physical, paper, back to back in one place.
• Create own strategies and monitor deals together
• Monitor real time position and exposure calculations
• Perform accurate inventory monitoring
• Allocate costs at multiple stages of the deal and across multiple deliveries
• Handle price adjustments based on escalation clauses (quality based discount/premium after delivery)
• Integrated back office which allows for finance and control functions
Such software also gives you the flexibility to report on:
• Create dashboards, by role type (Trader, Operator, Risk Manager) to monitor trade performance and report on trade profit and loss.
With the potential business risks of using spreadsheets so high, is software that automates physical oil trading and operations a better alternative?
From our experience there is still a place for manual processes and for using spreadsheets for adhoc analysis and any data should be able to be exported to excel. However as businesses grow and become more complex their needs change and the risk of relying on outmoded processes and spreadsheets can seriously impact business and operations, making the cost-benefits of automation more significant and the switch to specialist technology worth it.