Curt Mastio
By Curt Mastio on May 08, 2024

How to Move Beyond Excel in Financial Modeling

Excel financial modeling is probably the first thing that comes to mind when someone mentions business finance. 

Spreadsheets have become an essential business tool, and many financial experts perform most of their analyses using Excel. Because of their flexibility and versatility, many business people are so comfortable working with a spreadsheet that trying another tool never crosses their minds.

Excel financial modeling may be sufficient for more straightforward businesses. 

But what about a more complex business operation? Can excel spreadsheets adapt to your growing business?

Excel users appreciate the feeling of control as they easily trace formulas and links between the cells. But for a complex business setup, an automated system might be more practical. 

However, switching from Excel to an automated financial modeling tool is a big decision. In the beginning, the learning curve may feel daunting, and the transition might be uncomfortable.

But, ditching Excel to create robust financial models has never been easier and more effective. 

Why It Might Be Time to Move Beyond Excel Financial Modeling

There are a lot of factors that can influence your decision to shift toward automated financial modeling. Although some power users can work wonders with excel, it typically has limitations. 

Excel is limited

Business growth is essential but can directly affect the size of your team. 

A growing team means more people will have access to your spreadsheets. Maintaining security and data confidentiality can be challenging to control with Excel.

Additionally, one workbook cannot support data at the scale necessary to run a complex business. Limitations in specifications, memory, and system resources can quickly exceed Excel’s capabilities.

The need for collaboration

Excel can be a great tool, but collaboration options for a growing business are limited. 

Typically, when a user opens an excel workbook, other users are blocked from working in the same version. Multiple versions are needed for the whole team to work simultaneously in a spreadsheet. 

Unsynchronized information may lead to confusion about who has the final version, which isn’t ideal when planning your business’s future.

You need real-time data 

The best models use the latest, most up-to-date information. But, synchronization of real-time data is a big challenge with offline excel files.

In financial forecasting, time is one of the most vital factors in creating credible financial metrics. If inputs are unreliable from the beginning, frequent errors and delayed reports become the norm.

You’ve outgrown excel

As your business grows, so too will its complexity. Eventually, Excel will no longer support the functionality you need.

Here are a few signs your business has already outgrown excel:

  • Sustaining and maintaining excel spreadsheets is now immensely time-consuming.
  • It becomes more challenging to allow the entire team access to the same excel workbooks.
  • Handover of responsibilities to new employees can be challenging.
  • Too many users creates concern about the security and confidentiality of the data in your spreadsheets.
  • Data inputs are difficult to manage, affecting accuracy and timeliness. 

Benefits to Automating Your Financial Modeling

Automating your financial model is one way to ensure you’re keeping up with your business’s needs. A model you can efficiently scale makes financial planning much more manageable.

Switching to a more automated solution has other advantages as well. 

Humans make mistakes, but automating your financial model can limit errors that often occur in excel and provide more reliable metrics.

Timely data inputs give you instant access to the financial information you need. No more manual calculations or time-consuming consolidations as the data is already in the system.

Furthermore, you have greater control over access rights, and automated tools minimize the risk of exposing confidential data. By allowing your team to access the system directly, you’ll eliminate the need to send a financial spreadsheet via email. 

Financial modeling software often uses dashboards for easier access to the company’s financial health at a glance. Dashboards can be flexible, allowing users to customize and view only the charts and metrics necessary for decision-making.

Automated financial modeling also permits you to move beyond the standard data. Complex data sets help your growing business model multiple scenarios.

Things to Remember When Moving Beyond Excel Financial Modeling

Getting your financial model right is vital for piloting your company’s long-term success.

There are a few things to keep in mind when preparing to move past Excel modeling:

  • What do you hope to accomplish? Before transitioning to automated financial modeling, assess your business needs and goals. 
  • Outline what you’d like to see and which info must be included. Get specific about your inputs and desired results.

Plan your integration process. Getting your team on board will take time, but trust the process; it’ll pay off. Find a tool that fits your business needs. Each tool has unique characteristics, and choosing one from the many available can be a daunting task.  

Work with an experienced CPA. Transitioning from Excel to a more specialized financial toolkit can be a lengthy, complex process. Work with an expert who has helped many companies choose and implement financial modeling software. 

Ready to upgrade your financial systems and move past excel financial modeling? The team at Founder’s CPA can make the process easy. We’ll help you find the best tool for your business and walk you through the integration/implementation process. 

Set up a free consultation with our team of experts to get started.

Published by Curt Mastio May 8, 2024
Curt Mastio