Financial spreading is a process through which a bank or financial institution transfers all the financial information of a borrower to its financial analysis programme.

The first step of the financial spreading process involves inputting details of a borrower’s financial statements collected over several years to specialised credit spreading software or a simple spreadsheet. This enables analysts to compare financial statements over several years and spot trends or patterns. Financial spreading is important for financial institutions to determine the creditworthiness of a borrower.

Financial spreading could be used to analyse the financial statements of both retail and corporate borrowers. It can lead to substantial cost savings and enable financial institutions to make faster lending decisions. 

The following are challenges commonly faced by banks in financial spreading, and potential solutions:


Loan approvals are slow

Loan approvals are affected significantly when a bank does not use software to view and manage the financial statements of borrowers. When one individual inputs all entries manually, it is difficult to compare and check all the data, slowing the speed of loan approval. 

Spreading is not consistent at the branch level

Human error is common and affects efficiency – issues related to data redundancy and accuracy could arise with physical data entry and analysis. Financial spreading could be made efficient with the use of software to compare the financial statements of borrowers when providing loans. 

Reduced productivity

Entering all financial statement and tax data manually is a tedious process. An employee would then have to compare the data when the bank requests a particular company’s financial statements. This is unproductive work.


Centralising the spreading process

The entire financial spreading process could be centralised with the help of an online database or spreadsheet. All the financial statements could be sourced, mapped and processed automatically using software from internal and external data sources. This would streamline the entire process and not require manual entry, making the entire loan approval process faster.

With the help of state-of-the-art technologies, the data could be highly scalable and available for analysis and reporting.

Hiring an offshore team to handle complex spreads

A bank could hire an offshore team, making the team solely responsible for handling complex financial spreads, while the in-house staff handle all the core tasks. The tasks are thus distributed, enhancing employee productivity.

Deploying an automated and integrated tool

The software would work efficiently, with no need for human intervention. Automation is the key for importing and exporting all the financial statements and tax data of borrowers. Financial analysis of the data captured would be conducted by the software itself. The tool would be responsible for calculating a project’s future periods and financial ratios, and generating financial analysis reports.

Generating detailed methodology reports 

The financial spreading tool can generate reports after complete analysis – in formats such as MS Word, MS PowerPoint, and PDF. The reports could be fully configured and even consist of detailed peer-to-peer analysis. They would contain all the data necessary of all the borrowers in the database, facilitating comparison.

Financial spreading has emerged as a vital business function for banks across the world. However, not all banks would have the expertise required to handle this critical activity in-house. Hence, it makes sense to collaborate with a reliable outsourcing partner that uses cutting-edge techniques to handle financial spreads.