Excel is Not the Future of Financial Modeling
The legacy of Microsoft Excel is truly remarkable. It is both the greatest productivity tool in history and the ripest breeding ground for disruption. It does everything well and nothing perfectly. Excel has been the subject of myriad case studies and analyses (my favorite, “Excel Never Dies” by Not Boring, is here).
The tree of Excel-inspired unicorns is large and bountiful. Spreadsheets are how CPAs did their accounting before the creation of QuickBooks, how sales teams maintained their CRM before Salesforce, and how startups wrangled their cap tables before Carta.
Financial models are next.
Widespread adoption of cloud-based software is reaching middle market companies. Investment firms – particularly in private equity – are stepping up their focus on operational value-add for portfolio companies. Junior banker complaints about hours laboring in Excel continue to make Wall Street Journal headlines.
Building a financial model today is among the most human-intensive processes in business. It requires data from many systems – accounting, HR, supply chain and even top-line inputs like Square for POS businesses. It requires human inputs to build formulas that organize the model’s organizing principles. It requires collaboration across functions to aggregate expertise across the company into a holistic operating model projection. And it requires corporate finance and accounting expertise to prune these data and weave in adjustments like working capital assumptions and capex depreciation schedules to build a robust financial model.
FP&A professionals are already the superheroes who need to know everything about their business and lead a cross-functional effort to produce a holistic budget model. They frequently have their Thanksgiving and holiday season disrupted to deliver a new model (often recreated annually) by year-end.
Completing this arduous, multi-month process also requires a spreadsheets expert, and that is a problem.
Excel is not the future of financial modeling.
