financial modeling

Financial modeling

The importance of financial modeling to your company future 

Can you imagine trying to build a house without architectural plans? Or copying a chef’s meal without knowing the recipe? How about getting to a new location without a map?

Short of being incredibly determined, psychic, or lucky, you’d probably agree that those tasks would be difficult if not impossible without the vital instructions. In business, the equivalent is financial modeling. 

For the unfamiliar, financial modeling is a mathematical model that represents a business’ likely performance against a given financial situation. Typically created in Excel, the goal of the model is simply to forecast the financial performance into the future, based on historical performance and assumptions for what may happen in the coming months and years. 

Financial modeling can be applied for almost anything, including mergers and acquisitions, IPOs, consolidation, budget, discounted cash flow, and sensitivity analysis models.

As with business intelligence, financial modeling enables senior staff and other decision makers to make informed choices in a wide range of considerations, including but not limited to budgeting, capital allocation, acquisitions, raising debt and/or equity, growth plans, and forecasting for the years ahead.

How Vena’s financial modeling helps drive results 

Financial modeling is always a valuable exercise, regardless of how it’s constructed. To paraphrase George Orwell, though: all financial modeling is equal, but some is more equal than others. True enough, most if not all models will help to bring clarity to such dilemmas as whether or not to enter a new market and possible consequences of market shifts, and as a result you can build agile models that indicate the best way forward. 

Yet Vena Solutions takes it a step further, offering more than the standard modeling options. 

How, you ask? One way is by allowing you to utilize a vast array of data sources. More data sources means a greater degree of accuracy, because you aren’t relying on limited information. Relying on just the general ledger is like trying to paint with only a couple of colors, while company-wide data gives you a broad and colorful palette from which to paint your masterpiece.

If you’re wondering what sort of data sources Vena permits, it’s almost anything you can think of. Your CRM’s sales volume data, headcount data from your HRIS, the general ledger’s historical data, and even the marketing efforts that are keeping your pipeline healthy and full. You can bring everything from the business together in one place and implement financial modeling with more confidence than ever before. 

Perhaps the feature you’ll love most, though, is the ability to create truly agile real-time forecasts. Typical models are created and then frozen in time, so the model you created in April is exactly the same in October. The problem is, the real world can look drastically different from one month to the next, and your choice is to regularly make new models or hope that your existing one remains relevant down the line. 

With Vena, that’s a thing of the past. In a world where change is the only constant, a static model is a stagnant model. Now, you can create long-term forecasts in minutes, and they update in real time to indicate how your business could be affected by new market trends and conditions. And because these forecasts are based on data from a single source of truth that includes company-wide data, you’ll have more confidence in the models than ever before.

User case study: a brand new model in just one quarter

At ATB Financial, corporate budgeting was an annual event, and forecasting took place quarterly. It was impossible to track which team member inputted new data entries or made changes, and even what the changes were. Stakeholders were unable to make data-driven decisions quickly, and their internal setup didn’t permit granular analysis with the financial modeling. In just three months with Vena, ATB introduced a new budgeting and forecasting model. Gone is the annual budget plan; now, they update monthly and utilize agile scenario modeling. 

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