Yes, that’s the standard answer that I give to people who ask, “So what do you do”?
And typically, the next question is,“ Solutions for What”? – it’s understandable!
Understandable because I am deliberately vague – I want to prompt the second question, to stimulate more conversation.
It’s a simple reason – I love to talk about what we do and the solutions we provide for our clients.
We are specialists in providing comprehensive, quality, efficient predictive financial models for a wide variety of clients.
Clients who understand the benefits of having a flexible, relevant financial planning tool.
And if you are in a position of financial management and you really want to benefit your company – to improve your worth – then you should seriously consider adding financial modelling to your skill set.
For decades, corporate financial management consisted of preparing a detailed budget, having a robust accounting package, producing regular management accounts (financials), having management review meetings, identifying deviations from budget, determining the cause and taking remedial action.
In addition, some more effective financial managers, understanding that cash is of great importance, some might say, critical importance, to an entity, also produced rolling cash forecasts, which typically projected the cash position for the next 3 or 6 months.
Sadly, these cash forecasts were often produced independently of the accounting system and consequently were subject to error. i.e. no validating method was involved.
And, of course, it all worked.
So what happened? What caused some of the accounting professions most respected international practises to publish statements such as:
The focus of the finance function has clearly shifted from historical transaction recording and reporting towards forward-thinking planning and forecasting, modelling scenarios, future cash flow management and alternative funding options.
Ernst and Young
and,
“A financial model has become a critical tool used by organisations to understand business risks and make important strategic decisions. An effective model is robust, and flexible, yet user-friendly, so that it can be used to analyse the impact of operational parameters on the value and viability of a business” PWC 2019
Well I suppose the simple answer is “life happened”.
It never stops changing and both the pace and complexity of business have changed dramatically in the past decade.
Globalisation caused the need to review international accounting conventions and principles and spawned IFRS. (International Financial Reporting Standards).
And, now we are faced with a mighty wave – a tsunami – of change in the form of AI.
A change the magnitude of which we have not, and cannot, fully comprehend at this time.
At present numerous commentators are expressing their opinions, expounding of possibilities, formulating opinions.
Simply put, the old ways of doing things just are not sufficient – and while there is merit in learning from the past, in looking over one’s shoulder, modern business practices demand a much more proactive, forward looking, set of management practices.
One of the current hot topics in the world of financial modelling is “to what extent will AI make financial modellers redundant”?
Needless to say, there are divided opinions!
What is not up for debate, however, is the need for financial models – for the advantages and benefits of having a reliable, flexible predictive financial planning and strategy evaluation tool.
And the reason is simple. Competent, effective, intelligent financial managers know the value of financial models!!
The question is of course – “do you”?
And if you don’t, and feel the need to educate yourself, benefit yourself and your company, contact me and will be delighted to have a discussion. Or, as a starting point, read my recent eBook (click here to download).
I look forward to hearing from you.
Colin Human CA(SA)
Goalfix Financial Modellers
