What is financial modeling, and why are so many companies not doing it right? | Unit4
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What is financial modeling, and why are so many companies not doing it right?

How do you use the data and expertise you have to plan smarter? Easy, you use financial modeling and valuation to more accurately forecast the future. Sounds simple? It is, depending on how and where you’re doing it.

What is financial modeling used for?

Financial modeling is a process companies use to understand their current financial position and forecast for the future. Using data compiled from their historical performance and other sources, companies can make assumptions about what they face and how best to tackle it.

So, what does financial modelling mean? Well, financial modeling is simply an aid to better decision-making. Removing the guesswork and letting you make detailed and accurate plans that can support anything from reporting and forecasting to growth or even acquisitions and beyond.

How does financial modeling supercharge your organization?

Better decisions mean better outcomes. But better decisions only come from better data and the ability to use and understand that data. This is where financial modeling comes in.

Companies build financial models using as many of their data sources as possible. They then try to interpret what that data tells them about their organization and the behaviors of their customers and their people, aligning this with the performance of their processes, people, and services.

It all sounds equally simple and overly complicated. But there are ways to get it right and ways to get it wrong. Let’s start with how many companies are getting it wrong.

Why are so many companies getting it wrong?

Financial modeling and valuation are not new, and companies have been doing it for a very long time. What is new is the availability and volume of data. Suddenly, with the rise of digitization, you have access to more data than ever before. This is great news if data is the key to good decisions, isn’t it?

Data is essential for good decisions. But it’s not just the availability of data that makes that happen. As we said above, you need to be able to use and understand that data. How are many companies trying to do this? Well, it’s an age-old process, so why not rely on an age-old tool. Say hello to the financial planning spreadsheet.

That’s right, despite the rise of digital and the explosion in modern capabilities, power, and speed, most companies turn to the trusty old spreadsheet to manage this process. What could go wrong?

The reality is that we all know spreadsheets are hard to follow even at the best of times. But with vast volumes of data they become virtually impossible to manage, maintain or follow. The problem is that the amount of data is enormous and the tools are all new, and people get worried Suddenly, the critical part of the above sentence becomes “we all know spreadsheets.” So they rely on familiarity.

But familiarity is now affecting your decision-making and your bottom line.

How to get financial modeling right

This isn’t a tricky question to answer. There are a lot of modern forecasting, planning, and analysis tools, like Unit4’s FP&A, available today that can fix this problem instantly. They go way beyond spreadsheets, transforming your reporting and planning almost overnight. But how? Let’s take a look:

No more data entry

Forget laborious, error-prone data entry. These tools integrate entirely with your data sources and automatically bring that data together.

A single source of truth

With all your data accurately stored in one place, you no longer have to search for the information you need or hope it’s the most up-to-date version.

Real-time decision making

Data is available instantly, letting you make decisions and situations happen. Meaning you’re ready for anything.

Supercharge productivity

Automation and integrations save time and expense, but more importantly, they free your people from low-value tasks to focus on the work that matters.

Plan for anything

Scenario planning capabilities let you build the ultimate financial models. Now you can test infinite scenarios, challenges, plans, and outcomes before they happen and at no risk.

Data visualizations

Ditch the spreadsheets and bring your financial models to life with powerful data visualizations that let you tell the stories behind the data.

How can Unit4 transform your financial modeling?

Harness the power of fully aligned teams with Unit4’s intelligent FP&A software to drive success. Our solutions help you by combining automated, AI-infused financial planning and analysis, budget management, and financial forecasting with highly interactive dashboards and powerful, pre-configured models.

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Want to know more?

To discover more, you can check out our dedicated FP&A product pages here or click here to book a demo and see what our solution can do for your organization yourself.