Tiny details can have large impacts. Just as the proverbial kingdom was lost for want of a nail, so a finance chief could find his job in jeopardy as a result of a mistake in a spreadsheet cell. The escalating consequences of such an error, once introduced into the financial-reporting system, may include an audit delay, the need for a completed audit to be redone, a restatement of financials, and a restatement because of material error. In the latter instance, a stock-price drop could be collateral damage.

Auditors do discover most material errors before much harm is done, but the huge number of spreadsheets the typical company uses and the frequency with which they are updated multiplies the risk. To some degree, the danger is mitigated by capabilities in Excel and other spreadsheet programs that limit user access to cells and tabs. But managers often don’t take advantage of those features, notes Richard Block, a CFO consultant with executive-services firm Tatum and an accounting professor at Babson College. And in any event, it only takes one person to make a mistake. “It’s easy to make errors in spreadsheets, because you’re just putting in formulas,” says Block. “It’s not a system; it’s more like writing on a piece of paper.”

Companies are well aware of the potential problem. Usage of spreadsheets related to accounting processes may be formalized, so that there are records of who used the programs and for what purposes. There may be specific guidelines for how files are to be named (and renamed), where they are to reside, who will review changes, and how changes are documented.

A public company’s auditors may deem such manual-intensive procedures to satisfy internal-controls obligations under the Sarbanes-Oxley Act — which is one reason why a handful of software products designed to automate spreadsheet management have not been more successful. “It’s an area that we thought showed a lot of promise four years ago, but we’ve reduced our coverage of it over the past year because it has not sparked the interest of the market,” says Gartner analyst Jay Heiser.

There are four main vendors in the spreadsheet-management space, says Heiser. Two, Cimcom Software and Prodiance Corp., are based in the United States, while the others, ClusterSeven and Finsbury Solutions, have London headquarters. “They don’t have a lot of customers,” he says.

Their products are all essentially aimed at controlling the integrity of spreadsheets throughout their various updates. They report which spreadsheets have changed, who made the changes, when, and for what reason. They also may provide prioritized lists of spreadsheets that should receive more attention based on such characteristics as the number of changes, cells, or links, or based on dollar amounts above a certain threshold. And they may be able to look for signs that indicate mistakes or attempts to deceive, such as text that is the same color as a background, or flag spreadsheets not updated according to schedule.

While the market is still small, the products themselves are mature, says Heiser. Most of the key vendors have been around for several years. He says he’s surprised the software hasn’t attracted more attention, given the ubiquity of spreadsheets and the level of risk they represent. That may reflect a lack of ownership over spreadsheets, says Heiser: “The few organizations that have appointed someone to be responsible for spreadsheet control and accuracy have done a much better job of addressing the risks.”

Ralph Baxter, ClusterSeven’s chief executive, says most finance chiefs only see “the tip of the iceberg” when it comes to spreadsheets. The few they see are usually linked to hundreds of others throughout the organization. “They tend to regard a spreadsheet as too small to merit their attention, even though small things can do untold damage,” he says.

In what may be a sign of burgeoning interest in spreadsheet management, ClusterSeven announced on January 28 that it recorded its first-ever annual profit in 2009, although it provided no details; like its competitors, the company is privately held. ClusterSeven also said last month that its software has been integrated with IBM’s Cognos line of business-intelligence and performance-management products.

Another player in the spreadsheet-management space, Lyquidity Solutions — which, according to Heiser, offers a lower-cost product and “a lower level of customer intimacy” — recently made available on its Website a free spreadsheet-inventory service. It reports on file locations and names, actions taken by users, and dates that spreadsheets are created or modified. Bill Seddon, the company’s CEO, says the hope is that users will become interested in its commercial offering, ComplyXL.