Every organization needs to be able to forecast the company´s future financial performance that is based on historical data and this can be achieved through a tool called financial business modeling.
This tool means different things to different organizations but no matter the definition, it almost always includes a preparation of very detailed company specifics that will be used in financial analysis and the decision making process.
Many organizations still do this in Excel and others have a specialized tool for it to ensure it is possible to analyze the impacts of different assumptions or change in value of various variables.
For a financial business model to be good – it must be simple, it must focus on key cash flow drivers, and it must clearly convey assumptions as well as weigh risks.
If you are still using Excel for business modeling, here are some tips you need to keep in mind.
- Spreadsheet Design and Protection
- Use modular spreadsheet blocks to make updating the excel sheets easier without worrying about affecting others.
- Make sure that each sheet or workbook is protected from unauthorized people
- Ensure that there are proper labels on sheets to make it easy for all the users to follow
- Use different background colors to distinguish inputs from calculations
- Formulas and Linking
- Using formula and functions will save you a lot of time but make sure that these formulas are consistent
- Do not have the habit of copying formula from one sheet to another as it might create links
- Use templates to be more efficient
- Use links so that when inputs change, the outputs will also change accordingly
- Document assumptions to avoid misinterpretation and to help with validation
- Add source data and calculations to provide a good map
- Format cells properly and follow standard practices such as using currency symbols and percentages.
As your business grows, doing financial business modeling in Excel can be more cumbersome than helpful. Unimaginable staff hours will be spent on validating figures and fixing broken links and macros. As your business grows in revenue or complexity, it is best to look into solutions that can help financial business modeling become more of a fun activity to do than a dreadful one through intelligent automation.
Corporate Performance Management Solutions like Performance Canvas by DSPanel can help automate and streamline your budget process from reports to budgets to plans and to consolidation.
Many CPM tools out in the market today were built to address the growing pains of doing financial business modeling in Excel such as security issues, version control issues, and many more.
DSPanel offers cutting edge technology platform for business analytics, planning, and visualization. DSPanel designs, builds, and operates with the end users in mind. Performance Canvas was created by DSPanel to answer the unarticulated needs of the market not addressed by previous available solutions. With Performance Canvas, information is transformed into valuable business insights for the business executives to utilize in their decision-making process. DSPanel currently has over 2500 organizations deploying their solutions.