Here is How You Can Bring Your Financial Models To Life

by | Jan 4, 2021 | Finance, Planning, ValQ

ValQ Blog - Is your Financial Model Alive

What is the purpose of a financial model? To model financial outcomes of decisions, see the impact of a change in assumptions, to do a valuation of a business, etc. The purpose is not to visualize the potential outcomes in an easy-to-understand way.

This means that to communicate the results of your analysis you need an intermediate medium such as a PowerPoint presentation. This creates extra work and increases the risk of errors made during the transfer process. If you have created links between your model and slides this might reduce the risk of errors but also often slows down the transfer process. This is because too much data processing needs to be done at once. Could there be a better way?

There is a better way! Simply integrate your financial model into a visualization tool that even allows you to do simple modeling on the go.

The benefits of making your models come alive

There are clear advantages of integrating your financial model in a visualization tool especially if it lets you make simple changes in assumptions on the go. Here are some of them.

  • Being visualized in front of your business stakeholders makes it easy for them to understand the effect of various changes
  • It reduces the risk of errors as there no transfer happening between different systems or media
  • Significant flexibility is gained as you will never have to take a pause from the meeting to go and simulate the effect of questions asked by business leaders
  • You can even do drill-downs and change the perspective of the discussion by going from high-level to details and back again without getting lost in the numbers

Many planning tools and visualization tools offer these options today, however, few make it very easy to simulate changes on the go. And this point cannot be underestimated because you want to keep the flow in any meeting.

I recall an episode some years back where we were discussing the forecast for crew wages onboard a drilling rig. One of my peers had created a good financial model where we could get an overview of all components of the crew wages. It was not very flexible though and any new request would be impossible to make on the spot. In the middle of the meeting, the senior business stakeholder asked for some changes and I replied they could be ready in two weeks. He almost blew up on the spot and of course, I could also have made the changes much faster. Still, the point is that business stakeholders do not have the patience to wait for us to back to our model and see the impact of requested changes.

Revive your models and see your influence increase!

A great financial model has never influenced any decisions. It is how the insights that it produces are used and more importantly how they are understood. It is well-known that people outside Finance better understand things in visuals as opposed to numbers and tables. That means if you can bring your financial models to life with visuals you will increase the chance of influencing your business stakeholders with your insights. It is that simple really!

How do you connect your financial models with visualization tools? Do you have any manual transfer work or does it happen automatically in a fast and efficient way? How easy is it for you to change the model while in the meeting with your business stakeholders? The answers to these questions are key to your ability to influence key stakeholder’s decision-making. The question is: is your financial model a barrier or an enabler of your influence?

This blog is presented by ValQ in collaboration with Anders Liu-Lindberg, Business Partnering Institute.

If you have any good cases for ValQ or stories to tell about how such solution can benefit you, please reach out to us.
 

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