Groundstone AI | Commercial Real Estate Intelligence

Key Takeaways

•94% of business spreadsheets contain errors according to a 2024 literature review
•JP Morgan's "London Whale" incident resulted in $6.2 billion in losses from a formula error
•Financial restatements increased to 140 companies in 2024, more than double four years ago

The Research

A 2024 study led by Prof. Pak-Lok Poon of Central Queensland University reviewed 35 years of research on spreadsheet errors. The findings were stark: 94% of business spreadsheets used in decision-making contain errors. Some are minor. Others are catastrophic.

The research, published in Frontiers of Computer Science, identified three categories of financial consequences from faulty spreadsheets:

Loss in revenue, profit, cash, assets, and tax
Mispricing and poor decision-making
Financial failure

Billion-Dollar Mistakes

The history of finance is littered with spreadsheet disasters. Here are some of the most costly:

JP Morgan "London Whale"

$6.2B Loss

A flawed Value-at-Risk (VaR) model used incorrect formula logic. Instead of correctly summing data before division, the formula averaged rates directly. This fundamental error caused a massively underestimated risk calculation.

Fidelity Investments

$2.6B Error

An accountant manually transcribing financial records failed to include the minus sign for a $1.3 billion net capital loss. The positive entry was processed as a gain, throwing the dividend calculation off by $2.6 billion.

Standard Chartered Bank

£8B Error

In November 2018, a cell in the LMM spreadsheet showed a positive number (around USD 10 billion) instead of zero or negative for liabilities. The lack of control and review resulted in a £47 million fine.

SolarCity/Tesla Acquisition

$400M Error

When Lazard Investment Bank advised SolarCity on its $2.6 billion sale to Tesla in 2016, a computational error in a spreadsheet led to an inadvertent $400 million discount.

Tibco Software

$100M Loss

In 2014, Tibco shareholders received $100 million less than anticipated because Goldman Sachs used a spreadsheet that overstated Tibco's implied equity value at about $4.2 billion.

Why It Keeps Happening

According to the Poon et al. study, the root cause is structural: "Spreadsheet development has shifted from being often done by well-trained IT professionals to something millions of non-technical departmental users are now responsible for."

Most users "are not well trained in software development and testing, so it is not surprising that many spreadsheets they developed are poorly coded and inadequately tested."

The Problem Is Getting Worse

In the first 10 months of 2024, 140 public companies told investors that previous financial statements were unreliable and required restatements with corrected figures, according to Ideagen Audit Analytics. This marks a sharp increase from 122 companies the previous year and is more than double the figure from four years ago.

Financial Restatements Trend

2020~65 companies

2023122 companies

2024 (Jan-Oct)140 companies

Source: Ideagen Audit Analytics

What This Means for CRE

Commercial real estate deals live and die by the numbers. Rent rolls, proformas, operating statements, development budgets. Most are built in Excel. And based on this research, 94% of them likely contain errors.

When a capital provider reviews your deal package, they're looking for reasons to pass. A calculation error, an inconsistent figure, a formula that doesn't foot. These aren't just embarrassing. They kill deals.

Our Take

The solution isn't to stop using spreadsheets. It's to verify them. Every number extracted from a source document should have a citation trail. Every calculation should be traceable. Every figure should be cross-validated. That's what separates a professional deal package from a liability.