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- Best excel add ins for financial modeling how to#
- Best excel add ins for financial modeling software#
Best excel add ins for financial modeling how to#
#1 Define variables as a function of othersĪ killer feature of Excel and other spreadsheets is that you define the value of a cell by putting in a formula that tells the machine how to compute this value based on other values. Well, to me there are three essential aspects:
Best excel add ins for financial modeling software#
I just wanted to highlight that we don’t need something like a database-which is a better replacement for Excel for backward-looking, data-related tasks-to replace Excel for forward-looking jobs like financial modeling and planning.īut how should a software look like that is capable of “storing business logic?” Sure, the term logicbase is a terrible word, and I'm going to drop it immediately and will never use it again. Formulas that can handle multi-dimensional data with ease, so you can build the most complex models that cope with the complexity of the reality you want to model.Ī “logicbase”-How the hell is that supposed to work? That allows us to write formulas in a compact, human-readable, understandable way.
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Rather than storing and manipulating data we want to store and manipulate the business logic. So rather than a database, we need kind of a “logicbase.” A tool that allows us to keep track of the dependencies and influences of a model. Not adding up numbers, but building a model of the business logic that reflects what’s “behind the numbers”-or actually before ) Capturing this logic is the primary task of financial modeling. When you need to come up with revenues and expenses for the future, however, you must know the logic of your business. As long as you recognize the revenues and expenses correctly everything is fine.įinancial modeling is not about data. You don’t need to know what were the rationales behind the supplies order, its size, and timing. You don’t need to know what actually happened before a customer bought your product. For accounting, it’s enough to record the “monetary traces” of the business-revenues, expenses, assets, liabilities, cash flows.įor accounting, it’s enough to record the “monetary traces” of the business-revenues, expenses, assets, liabilities, cash flows. You spend money on advertising in the hope of more customers to buy your products. The value of your assets is decreasing, so you write them off.
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You take out a loan, pay monthly interest, and repay it at the end. Customers pay 30 days after they got the invoice.
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We could call this mechanism the “business logic,” which is all the many things that happen and influence each other when you run a business: Customers decide to buy your product. The data of the past was generated by some kind of “mechanism”-whether we know and understand it or not. All this based on data. To do this, you need data. With BI tools, you basically categorize, sort, compare, analyze, find out patterns, structure, etc. And it’s necessary and useful to cope with this sea of data and make sense of it. Today’s world is full of data, and we are producing even more of it every day-exponentially more. That’s why many see the solution for replacing Excel for planning and modeling in the use of BI tools like Business Objects, Oracle BI, Hyperion, IBM Cognos, etc.ĭatabase and BI tools are great for data.īI tools and databases are great for dealing with tons of data. You shouldn’t use spreadsheets for accounting and managing data-and not for planning and modeling either. For modeling, you can check them out here for example. The weaknesses and flaws of spreadsheets for modeling are basically the same as for data storage and analysis. Today it is almost common sense that you could do that in Excel, but for real-life applications, you definitely should use other tools that are better suited for these tasks.Īpart from these “backward-oriented” applications which deal with storing data and processing information, Excel is also used for forward-looking tasks like planning, budgeting, financial modeling. In the beginning, Excel and other spreadsheets were used for accounting, but also for managing lists of items, such as product inventories, assets, contacts, and employees-essentially small databases.