When making business decisions, the financial aspect often plays a crucial role, with companies relying on financial modeling for that process. These are models that represent a numerical representation of the company’s activities, earnings and costs in order to predict future results and make further decisions based on them.

As a “decision-making” tool, financial modeling is used for various purposes, whether it is the valuation of a company or property, acquisitions, investments in new equipment, pricing, etc. The dilemma that many finance departments are faced with is: should they keep using Excel spreadsheets or switch to a specific financial modeling software?

Excel and financial modeling – what are the issues?

Excel has been synonymous with financial planning for decades, enabling the processing of various calculations, schedules and formats. Some of the basic principles for creating successful financial models and reporting were developed in it, so even today this program is the primary choice for 80% of companies.

As the market rapidly matures and changes, however, financial modeling also evolves, so Excel’s ability to respond to these demands has its limitations.

Here are some of the most common disadvantages of Excel in this process for companies:

• Complexity of tasks – as company processes become more complex, Excel runs into difficulties. Financial modeling requires multiple dimensions and multiple parallel scenarios with “what if” situations, while Excel is usually only two dimensional.
• Compliance and the risk of errors – “human factor” errors become more prominent as a result of too much manual data entry, multiple people working on one list and issues related to different versions of the same file.
• User experience – modeling in Excel requires employees to be highly proficient and skilled in using it, while at the same time, it is necessary to have excellent knowledge of financial functions and how their programming works. Additionally, Excel is not flexible enough to respond to model changes occurring in real time.

In the world of finance, Excel had gained its fame thanks to its ability to model almost anything. But companies are increasingly finding themselves in a situation where they are looking for new solutions, since Excel spreadsheets cannot adequately respond to the constant changes and complexity of the situations they face. Thus, the next obvious choice is looking for specific software designed for financial modeling.

Why should you replace Excel with financial planning software?

When compared with the rather impractical process of manual data entry in Excel, financial modeling software offers clear structure and error prevention – everything that companies are looking to achieve in their analysis.

Once the model-based software is set up and integrated with your system, running forecast reports is simple and fast. Additionally, the software can query your data more efficiently and has a preset directory of calculations and assumption types. Calculations are automatic, entrusted to technology, and the lack of human input generally means that errors will be reduced.

More and more companies in the region are turning to these types of software. Coral, one of the largest Croatian gas wholesale and retail companies with 40 gas stations in the retail chain, has completely replaced Excel with Farseer, a central financial planning and reporting system in the cloud.

Due to fluctuating gas prices, Coral required a solution for integrated planning of multiple scenarios at the same time and their impact on the company, which was impossible to run in Excel spreadsheets. Using Farseer, Coral was able to create and compare complex multi-driver scenarios in a matter of few clicks. Also, by simply changing the variables on the dashboard, users can immediately see the conducted changes and their impact on financial KPIs. With this software, they now cover P&L, cash flow and balance sheet planning, which would otherwise be very difficult to achieve in Excel.

Financial modeling and planning in the cloud

What are the specifics of such a software?

Farseer is a low-code SaaS (Software as a Service) for financial modeling, planning and analytics in the cloud, intended for companies that outgrow spreadsheet solutions, as we saw in the example of Coral.

With complete flexibility in model creation, the user saves time by reducing manual tasks and increases decision-making efficiency by generating automatic forecasts with the help of machine learning, in addition to quickly creating reports and important assessments (what-if scenario).

Compared to existing FP&A solutions, instead of costly and time-consuming integration, Farseer provides the ability to automatically export and read databases from accounting systems or bank statements. As users independently maintain Farseer and manage the planning process and user rights, the Total Cost of Ownership is significantly reduced.

How and why should you turn your focus to software for financial modeling “in the cloud”?

For those who are thinking about this kind of software, it is important to know that there are no technical incompatibilities for using it. Access to the application can be done through a browser, and Farseer is available on the Mainstream Cloud Marketplace, under the selected business applications “in the cloud”.

By choosing an application in the cloud, companies do not have additional maintenance costs – Farseer is a SaaS model, which means that companies that implement it do not need to buy infrastructure and maintain it, since the solution is hosted “in the cloud”.

The implementation of financial planning software reduces many steps in this process to a single click, and for all who decide on it, it is a significant step towards digitalization of business, which is inevitable in today’s fast-paced tech-progressing world. With efficient software on the cloud, financial planning becomes faster and more accurate, saving time and resources necessary for successful business.

Are you ready to move your financial planning to the cloud? Our experts are here to help you transform these processes by giving you the support you need for choosing and implementing the best solution.