Three ways financial modelling improves business outcomes
Goalfix's Colin Human: Financial modelling is the best tool to help make informed business decisions.
Tea leaves, fortune cookies, crystal balls and palm readings are all indications that humans crave knowing their futures. Whatever your beliefs in the accuracy of these methods to predict the future, you can have confidence in financial modelling.
However, Colin Human, CEO of Goalfix, explains that financial modeling does not have to be 100 percent accurate to be useful. Nothing can actually predict the future. “But financial modeling is the best tool to help investors and management make informed decisions.”
Here are three ways financial modelling improves business outcomes.
It puts the business of project under the microscope
To produce a useful and effective model, a modeller needs to identify, uncover and quantify every aspect of the business. Even if the company wants a model to improve corporate performance or the feasibility of a new investment, all components of the business must be studied. The model beds down assumptions and enforces some discipline. Says Colin: “This investigation is often is often illuminating and informative to management.”
It helps businesses during periods of rapid change
Financial modelling is a tool for agile planning. Financial models, at least excellent ones, are flexible and can be adapted or updated easily to reflect real-time business conditions. There is a deluge of information for companies to grapple with. Businesses are struggling to get a handle on the complexity of financial and non-financial data. Financial modelling cuts through the chaos, teases out what’s important, and helps the manager make thoroughly informed business decisions.
The financial model’s forecasts may force uncomfortable questions, such as whether the business is going to make more money in the long term or how to ensure the company doesn’t run out of cash.
It is a planning and implementation tool
Provided they are properly researched and built according to international best practice standards, effective models permit “what-if” analyses and quantify alternative scenarios. And once management has reached consensus and agreed on the most likely or profitable course of action, the model becomes a planning and implementation tool. Colin says that financial models are a roadmap for the achievement of agreed business objectives.
Financial professionals are ideally placed to learn the critical skills to conduct financial modelling. Goalfix is a globally-recognised trainer for the Financial Modelling Institute. Goalfix’s courses are excellent preparation for the global Certified Financial Modeller certification.
Visit the CFO SA Training page to sign up for “Financial Modelling”. You’ll qualify for a 10 percent discount if you sign up with the code CFO2018.
Professionals who have completed the Financial Modelling course sing its praises:
“I enjoyed Colin as a facilitator. He has extensive knowledge of the subject. I also love how the course was laid out and how the Excel workbooks are aligned with the course manual. I can now go back and revise and redo the exercises.” - Joanne Tilley, Investec
“I am new to the Financial Modelling space but found the Masterclass to be very informative and comprehensive. I appreciate how the material complies with international standards and look forward to applying my new skill-set in the near future” – Iben Botha, Tsogo Sun