Effective financial modelling certainly needs the work of someone who knows how to use Excel, and can do things neatly, cleverly and consistently. However, this important job shouldn’t be thrown at your most-junior accountant just because they’re the best at using Excel.
Working as a team, not going alone
Like any business process, financial modelling should be tackled with the combined resources and wisdom you have as a team. As time-pressure looms, it’s all too easy to chuck it at someone bright and put blind faith in their handiwork when the model emerges, coated in sweat and blood, the next morning. Solo financial modelling creates risk, though. People make mistakes, especially under pressure.
Imagine you are having some building work done. You’d want a credible and structured team doing it. There should be an architect, a project planner, some builders, a foreman or two, a specialist electrician and a plumber, and a standards inspector at the end. You wouldn’t be filled with confidence in the building work if just one worker, however dexterous, turned up with a wheelbarrow and just set straight to work.
The right roles for the job of financial modelling
When your business needs a financial model, you want to make sure that the right roles are filled, and that there’s a productive interplay accompanying an orderly process that sees each specialist apply their expertise. Great financial modelling needs:
- leadership and oversight from the board at the start to determine the scope and detail needed in the model, and to form the strategic view of what the model should achieve
- ideas on design proposed by the financial modelling expert and their manager, challenged and then signed off by the leadership
- time away from day-to-day responsibilities for the builder to do the additional labour needed
- disciplined work in a planned order, to a timetable, with checks and balances built in
- independent scrutiny by the manager, who offers a second pair of eyes looking for the right things, and iteration of fixes and checks as snags are dealt with
- overall review, challenge and ownership from the board of the results – fuelled by understanding and comfort with the principles that built it up.
Financial modelling may see its most intense activity with a skilled Excel expert, but the process to get it absolutely right for the business begins and ends at the top.
