In order to understand the benefits of financial modelling, it is important to grasp what financial modelling actually is, financial modelling is the process of building a mathematical model designed to represent a real world financial situation. So why is this beneficial to your business? Let’s have a look at some of the reasons:
1. Financial models try to minimise risk – the aim of financial modelling is to mimic real life situations on a small scale in order to find out what would happen in the actual situation. Understanding what would happen and having this knowledge helps businesses to minimise their potential risk and make informed decisions.
2. A quick understanding – financial models have the ability to provide rapid answers to real world scenarios and questions so that if a business has to work quickly to make a decision they are able to do so.
3. Shared knowledge – the financial modelling provides the ability to share information easily and quickly between people and across different locations.
4. Financial models provide consistent results – the decision outcome is dependent on the inputs and due to the objective nature of the models, the same inputs will always produce the same decision.
5. Competitive advantage – gaining a real world understanding of the impact that a financial decision may have on a business, through the use of financial modelling provides a business with a tantamount competitive advantage. Not only will they understand their own business but also how they can use the outcome for their benefit.
6. Identifying opportunities for cost saving – two main objectives for businesses are usually how to make more money and how to save more money; with the use of financial modelling various scenarios can be recreated in order to understand where there are opportunities for cost saving, by forecasting cashflow, allocating resources and setting budgets and targets.
7. Provides an understanding of planning for growth – In any business growth is a fundamental goal and achieving this requires an in-depth understanding of all areas of the business and how these have an impact on the growth of the company. Financial modelling assists in understanding this as well as various scenarios.
These above are just some of the benefits of financial modelling and to understand these and more requires expert knowledge and years of experience. It is therefore best to leave this task up to professional financial modellers.
Established in 1998 Goalfix Financial Modellers has grown into a highly specialized firm of financial modellers and model trainers. To learn more about financial modelling services or financial modelling courses offered contact Goalfix today.