Microsoft Excel is one, if not the most, popular spreadsheet software you can find in the market today. It’s user-friendly, widely available, and familiar to most people. However, over the years, Excel has proven that it also has some limitations, especially in building financial models.
Building financial models help companies keep track of their expenses and income, as well as evaluate if the company’s financials are good enough in terms of long-term business goals. A financial model also helps companies have more information at their disposal, which is vital, especially when companies need to make big decisions that can have a big effect on the company’s future.
To help you make sensible business decisions, here are some of the reasons to stop using Excel in building financial models.
Excel is a standalone application
You’ll need a lot of luck if you’re planning to use the data in your excel spreadsheet for another application; it’s because Excel is a standalone application. This means you can’t integrate it with other business systems.
Due to this, users have less flexibility in how they want to handle their data. While you can have your employees transfer your Excel data to other systems, it’s a tedious process that requires a lot of time, and it can reduce your data’s integrity, too.
As they say, don’t keep all your eggs in one basket, and that saying holds when it comes to Excel.
Excel is error-prone
Even if you can guarantee that your skill and expertise will help your spreadsheet be free from errors, you can’t trust that the other people you work with are as good as you. Furthermore, as you can’t use a single Excel file simultaneously, it can create a lot of confusion.
Also, as different people work on an Excel file, one can make tiny errors. And, when you deal with a spreadsheet, a small mistake can lead to hundreds to thousands of computations being wrong. With more and more people working on an Excel file, errors are more likely to appear. This specific weakness leaves companies prone to data integrity issues.
Also, it’s an even bigger problem considering that companies usually make decisions based on financial models.
It’s not time-efficient
In the fast-paced world of business and finance, you can lose and earn money with every counting minute. Because Excel lacks time-saving features, you can take too much time working on a single spreadsheet.
While Excel is good with numbers and statistics, it’s not designed to consolidate financial results automatically. It results in employees having to work hard to organise the company’s financial data, wasting loads of time. Also, there’s the risk of errors in the spreadsheet, making the hours used in consolidating it wasted.
Excel is terrible at complex financial models
Years ago, Excel was one of the top software in financial modelling. But now, as technology has advanced, basing your business decisions off basic two-dimensional X-Y models just don’t cut it anymore.
In modern business, decision making requires proper analysis of different scenarios to create the best decision and reduce risks. While it can make financial models, Excel doesn’t provide you with the big picture financial model you need.
When making important business decisions, you can’t fully trust an application such as Excel to provide you with complete and accurate data. For you to have a better understanding of your data, you need a fully integrated and extensible platform that provides holistic data management and customised visualisations.
In fact, financial modelling companies use Excel alternatives and/or supplements like dashboard software to offer data visualisation storytelling services. These applications bring data to life, helping the company make the right decisions based on valuable insights.