Your Distribution Waterfall May Be Costing You Million

Your Distribution Waterfall May Be Costing You Millions

Did you know that 88% of spreadsheets have at least one error? The distribution waterfall models built in Excel are no exception. One incorrect keystroke could cause distributions to be calculated inaccurately, leading to incorrect payouts that will either hurt your bottom line or damage your relationship with investors.

The average benchmark for data entry error rate is generally acknowledged to be 1%. So what does that mean? 1 out of every 100 entries made into your spreadsheet are invalid. These entry errors can have enormous financial ramifications. Back in 2006, a single keystroke by a trader in Japan caused Mizuho Securities to lose the equivalent of $385 Million. At one point, the “flash crash” of 2010 was thought to be caused by “fat finger error” ($1.1 trillion of investor dollars was lost in 36 minutes, although most was quickly regained).

Cash flow from a development or investment project can be split in countless numbers of ways, which means a lot of entries and most likely multiple errors. Waterfall models are one of the most complicated tasks sponsors have to deal with. The numerous variables involved make calculations cumbersome and confusing. You don’t have to be a victim of human error anymore.

Take a look at IMS and Excel head to head:

The IMS Platform Excel
Automated formulas and calculations Yes No
Built in simple distribution waterfall calculation capabilities and complex distribution priorities (promotes, prefs, hurdles and catch ups) Yes No
Converts rules to plain English for easy auditing Yes No
Seamless connection to distribution processing Yes No

 

Spreadsheet errors no longer need to be accepted as the “cost of doing business”.

 


 

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