Chapter 5: Spreadsheet Engineering

The Art of Modeling with Spreadsheets

S.G. Powell and K.R. Baker
John Wiley and Sons, Inc.

PowerPoint Slides Prepared By: Tava Olsen Washington University in St. Louis
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Spreadsheet Engineering
Builders use blueprints or plans

Without plans structures will fail to be effective

Advanced planning in any sort of design can speed up implementation Spreadsheets are no different from other arenas of design

Engineering and advanced planning aids effectiveness

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Spreadsheet Design
An efficient process minimizes time spent An effective process yields results that meet users requirements Good design helps analysts spend the majority of their effort improving decisions, rather than building and fixing models

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Spreadsheet Errors
Many, perhaps most, spreadsheets contain internal errors

Errors multiply with use

A variety of empirical studies have been performed

All show spreadsheet errors to be common Users are overconfident

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The Phases of Spreadsheet Modeling

Designing Building Testing

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Designing a Spreadsheet
Plan Modularize Start small Parameterize Design for use Keep it simple Design for communication Document important data and formulas
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Plan
Measure twice, cut once Will decrease time spent correcting mistakes Turn computer off and think before beginning Begin with a sketch

Physical layout of major elements Rough indication of calculation flow

Anticipate models ultimate uses

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Modularize
Group like items and separate unlike items Separate

Data Decision variables Outcome measures Detailed calculations

Influence diagrams aid with this design Formulas should generally reference cells above and to the left
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Start Small
Sketch full design but do not build all at once Isolate one module then build and test that module Local mistakes much easier to detect than when part of the global model

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Parameterize
Place parameters in a single location away from calculations Formulas should only contain cell references, not numerical values Assists in:

Identifying parameters Sensitivity anlysis Documentation

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Design for Use

Anticipate who will use spreadsheet

What type of questions will be asked?

Make it easy to change common parameters Make it easy to find key outputs

Group in one place

Include graphs of outputs Record numerical values of base case outputs

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Keep It Simple
Complex spreadsheets:

Require more time and effort to build Are much more difficult to debug Decompose complex calculations into intermediate steps

Keep formulas short

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Design for Communication

Spreadsheets lives are often longer than expected Use visual cues that reinforce models logic

Use informative labels Use blank spaces Use outlines, color, bold fonts, as appropriate

Split windows can aid in viewing

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Document Important Data and Formulas

Record source for important parameters Explain important formulas Use Cell Comments to describe cell contents Consider a separate module to list assumptions
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Cell Comments
Insert Comment to add documentation to a cell Tools Options View gives different display options

Comment & indicator permanently display comment Indicator red triangle indicates comment, display when cursor in cell None neither comment nor indicator visible

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Workbook Design
Use separate sheets to group similar kinds of information Design workbooks for ease of navigation Protect workbooks from unwanted changes during use

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Use Separate Sheets to Group Similar Kinds of Information

Makes model easier for outsider to use Isolate technical details of model Bring assumptions and results to the fore Users should only interact with a few, easily recognized, sheets

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Design Workbooks for Ease of Navigation

Any form of structural help for users is beneficial Use revealing names for individual sheets

Double-click on name tab at bottom of spreadsheet to edit name

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Protect Workbooks From Unwanted Changes During Use

Lock cells not to be changed Use worksheet protection Use data validation

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Locking Cells
To lock all cells

Select entire worksheet Select Format Cells Protection and check the box for locked Select desired cells Select Format Cells Protection and uncheck the box for locked
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To unlock variable cells

Protecting Worksheets
Tools Protection Protect Sheet At top of Protect Sheet window check box for Protect worksheet If check only Select Unlocked Cells

User will be able to only select and modify unlocked cells

User will be able to select any cell but only modify unlocked cells
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If check Select Locked and Unlocked Cells

Data Validation
Controls input values Highlight cells then click Data Validation Three tabs

Settings: Restrict inputs (e.g., range of cell values) Input Message: Create message when cursor on cell Error Alert: Alert for invalid entry
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Building a Spreadsheet
Follow a plan Build one module at a time Predict the outcome of each formula Copy and paste formulas carefully Use relative and absolute addressing to simplify copying Use the Function Wizard to ensure correct syntax Use range names to make formulas easy to read Use dummy input data to make errors stand out
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Copying and Pasting Formulas

Copying (rather than retyping) reduces the potential for typographical errors Copying can also be a source of bugs

e.g., wrong range copied

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Relative and Absolute Addressing

Necessary for efficient copying An address such as B7 is relative

In cell A6, B7 represents one row down and one column to the right If copied, new formula will refer to new cell that is one row down and one column to the right Cell will not change if formula is copied Use for parameter values

An address such as $B$6 is absolute

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Function Wizard
The button fx brings up the function wizard Contains a complete list of all Excel functions Selecting a function will bring up a window showing needed inputs Function value will be shown in window automatically
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Range Names
Any cell or range of cells may be named Name or cell reference may be used in formulas

Names easier to debug and use

Require extra work to enter and maintain Select Insert Name Define to assign a name Pull-down window at top left of spreadsheet

Shows all named cells for workbook Can be used to enter individual cell names

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Testing a Spreadsheet
Check that numerical results look plausible Check that formulas are correct Test that model performance is plausible

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Check That Numerical Results Look Plausible

Make rough estimates Check with a calculator Test extreme cases

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Check That Formulas Are Correct

Check manually Display individual cell references Display all formulas Use the auditing tools Use error checking

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Checking Formulas Manually

Visually audit formula each cell at a time Most effective when range names used Tends to be tedious

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Displaying Individual Cell References

Press F2 or double-click on cell of interest Reveals formula with color-coded cell references Stronger visual clues than manual checking

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Display All Formulas

Hold down control key and press tilde key All formulas are displayed Makes for easier scanning Aids in detecting deviations from patterns Reverse by repeating Control Tilde

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Using the Auditing Tools

Identifies predecessors and successors of cells Select Tools Auditing Show Auditing Toolbar to display auditing toolbar Trace Precedents

Colored arrows to predecessors Colored arrows to successors

Trace Dependents

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Error Checking
Tab under Tools Options Available in Excel 2002 and later versions Equivalent of grammar checking in word processing Cells with possible errors are flagged with colored triangle

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Errors Checked Under Automatic Error Checking

Evaluates to error value Text date with 2 digit years Number stored as text Inconsistent formula in region Formula omits cells in region Unlocked cells containing formulas Formulas referring to empty cells
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Test That Model Performance Is Plausible

Model should react in a plausible manner to a range of inputs The user should be content with trends in output based on varying inputs Sensitivity testing (Chapter 6) is an important tool to test plausibility

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Summary
Spreadsheets deserve careful engineering

Most spreadsheets contain errors Users are over confident about their models

Rules for spreadsheet modeling

Designing a spreadsheet Designing a workbook Building a spreadsheet Testing a spreadsheet

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