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How to Simplify Your Financial Modelling
July 28, 2016
When the time has come for a business to consider expanding, the majority of businesses turn to financial modelling to make data driven financial decisions.
Not 100% on what financial modelling is? Do not despair – Financial modelling is the process by which a business builds an abstract model or representation of a real world financial situation in order to forecast a picture of future security.
Many of the traditional financial modelling processes are becoming outdated and obsolete in today’s fast paced and interconnected world and the financial modelling that has previously been on offer hasn’t been entirely aligned the business reality. While large businesses have excuses for this to some extent (shareholder scrutiny, old habits etc) simply put, young SMEs and start-ups don’t.
The risk for business owners when it comes to financial modelling is that it can be an overwhelming, complicated task that is undertaken without the proper structure, guidelines or methodology. This in turn could compromise the discipline and quality that is needed. Common mistakes includes inconsistent colour coding for hard codes, long formulas, inconsistent shading in cells and inconsistencies in units for line items. The results that these issues can lead too? Calculation errors, slow and painful updating processes, increased risk of error, risk or confusions and misinterpretation and inaccurate data leading to the risk of wrong decisions being made. A lack of best practice can also cause any shareholders within the business to lose confidence in any expansion you are planning to embark upon.
Whilst we are all fairly familiar with Word, Notepad and PowerPoint applications, when it comes to Excel many people can be seen slowly backing away with trepidation and fear. But, for every business owner there will come a time when we will need step into the circle of fear and become a (somewhat) master of the quintessential business application that is Microsoft Excel. One or two day Invest for Excel training workshops is a service that we offer clients, to instil the confidence in their ability to use Invest for Excel.
Simplifying your financial modelling is business critical in many scenarios. The variables involved should be limited, the information should be 100% relevant and structured properly. The financial model should be able to be presented to an average person who is able to comprehend the model with ease. Aim for 3 outcomes; simple, scalable and robust.
Invest for Excel was created with these 3 outcomes in mind; the product can be utilised by any business regardless of size; it is currently used by SMEs and large multinational corporations alike. Despite gaining a reputation for being a less than desirable task, the technicalities of financial modelling should not be time consuming or particularly difficult. Using a program that was designed to make the process more simple and efficient whilst offering improved accuracy will allow you to make far more informed decisions when it comes to your capital expenditure. How does Invest for Excel do this? By using a standardized calculation that allows the user to implement a wide range of reports and financial statements for comparisons and consolidations, giving a holistic view of the potential in the growth of the business. Invest for Excel will remove the fear of wasting valuable time and money for an inaccurate end result, providing you with reliable results that instil confidents in your decisions.