Excel starts as a shortcut
Someone needs a faster way to track work, costs, approvals, exceptions, or customer details. Excel is available, flexible, and familiar, so the first version works well enough.
Then it becomes the system of record
The problem appears when the file becomes shared infrastructure. More people edit it, formulas carry business rules, and managers depend on manual consolidation before they trust the numbers.
The real problem is ownership and workflow
At around 20 employees, the risk is rarely one formula. It is unclear ownership, weak permissions, no audit trail, and work that happens outside the file before someone cleans it up later.
What to replace first
Start with the spreadsheet that has the most users, the most manual copying, or the highest management dependency. The goal is not to eliminate every spreadsheet. It is to move the operational workflow into a system the team can trust.