Finance Utopia Founder Mark Cracknell thinks back to his time working in finance functions. “You’d do a 12-month budget, from January to December, but then you’d get to early November, your forecast would only last another two months and you’d fall off a cliff.”

For Cracknell, who specialises in helping CFOs transform their companies’ finance functions, there is a very good reason why that inefficient, 12-month cycle has endured. The process of budgeting, forecasting and modelling is hugely intensive. If it’s not being done with the correct technology, it can be extremely time consuming, too.

“One of the barriers to the accepted best practice for higher-frequency modelling is not that people don’t believe in it, or don’t want to do it,” he says. “It’s that the tech they’re using just doesn’t support it. It’s painful enough to do one cycle per year – let alone 12 to 18.”

Competitive genre

In Cracknell’s assessment, any tool that enables professionals to efficiently create an extra year or other future period in their forecast is advantageous; even more so if it’s relatively simple to maintain. At the same time, he notes: “A high-frequency forecasting and modelling process hinges upon the input of multiple collaborators. So, you need a tool that’s enterprise wide – one that all relevant parties can access securely and contribute to in real time.”

This is one of the most competitive areas of the tech market, says Cracknell, and there’s a good reason why. “If, as a vendor, you sell a planning solution into a business with multiple collaborators, it would tend to be for a pretty big licence fee.”

There are many different brands jostling for position in this sector. For example, Cracknell cites Anaplan, Vena, Workday, Pigment, Planful, CCH Tagetik and OneStream – all of which are popular among larger organisations. In the SME arena, some of the leading tools include Spotlight Reporting, Futrli, Fathom and Syft Analytics. Indeed, the latter has recently made waves with the launch of Syft Assist: an artificial intelligence copilot, fully integrated across the platform’s various functions. “All of those products are really good at what they do and will certainly provide a foundation for the ability to deliver high-frequency forecasts.”

However, he stresses that many people don’t appreciate that planning and modelling is a process that needs workflow control and tech to support it. “On that basis, for me, the transformation journey is actually as much about process automation as the modelling itself. You’re trying to automate a very sophisticated sequence of steps, which will have different nuances for different companies. And that must be reflected in how you select your software.”

Cut your cloth

That choice takes some discernment, Cracknell warns. In his experience, companies will typically send vendors complex requests for information with dozens of questions about the platform’s specs: can it connect to other data sources? Does it have a friendly user interface? Can it do basic sums? However, he says: “What I’ve found is that most products will do 95% of what you want them to do quite comfortably. It’s only in the remaining 5% where you get the type of complexity that can truly differentiate between the offerings.”

With that in mind, he recommends that you write down the four or five most complex things you want to achieve, and put them to your prospective vendors. Focus your choice on the size and strengths of your finance team. “If you’re only, say, four people, avoid solutions that require a high level of maintenance because they’re quite big beasts and that’s almost a full-time job. Cut your cloth accordingly.”

Cracknell says that smaller teams may be more at home with a product such as Vena, because of how it harnesses Excel, which staff would be more used to. That leads him to point out that Excel is still very much in favour within the profession, and will continue to play a valuable role in any project to modernise forecasting and modelling. “In my opinion, what you must do in Stage One is create a quick efficiency win by automating your current process. That can be done by taking your current Excel model and putting control and process around it. Once you’ve got that working, it gives you time to think about how to develop the complexity of the model.”

He notes that a lot of companies try to boil the ocean when they buy a planning solution. “They come really unstuck because they’re trying to change too many things at once.”

Trusted toolkit

Ben Ducker, Corporate Finance Director at RSM UK, is an Excel advocate who is keeping a keen eye on the software’s evolution. He confirms that Excel is still a vital touchstone for accountants.

“First, it’s portable,” he says. “You can email files to colleagues and it’s really easy to share. It’s ubiquitous – everyone has a licence, so it’s widely accessible. In addition to its template capabilities, it’s bespoke. You can start with a blank sheet and do whatever you want with it. 

“Plus, developing an Excel solution is quite rapid. An enterprise-wide tool may take a long time to scope. But you can build a workable Excel model in three or four days. For those reasons, I think it’s likely to be the default forecasting tool for many businesses.”

With more and more companies requiring sharper support for data-driven decisions, Excel is adding some interesting features, according to Ducker. Power Query brings in a back-end data engine that expands Excel’s capacity far beyond the standard million rows on the grid face. VSTACK enables users to concatenate tables of data for 360-degree analysis and detailed filtering. And Python, currently in a test phase, is set to imbue Excel with a whole new array of cutting-edge facilities for manipulating and scrutinising data.

Ducker also notes that a growing crop of tools is emerging to help users custom-build Excel models to fit with their companies’ specific forecasting needs. One of those is Modano, which RSM has recently started using.

“You can start with a template and swap new bits in and out,” he explains. “The output you get is an Excel model – but the add-in enables you to customise functionality, or download alternative modules to plug in, allowing for a faster and more efficient development. There’s a learning curve, but it’s really scalable. 

Where it comes in particularly handy is saving time on the routine parts of a model build, buying developers more time to focus on the really value-added aspects of the process, he explains. “While enterprise solutions are black boxes, Modano enables you to build transparent, Excel-based models efficiently.”

Useful links 

To strengthen your financial modelling acumen, sign up to the Financial Modeling Institute’s Advanced Financial Modeler Accreditation. The virtual accreditation is running on multiple dates in July and October and costs £450 + VAT for ICAEW members and non-members.

For additional information about best practice in this field, read ICAEW’s Financial Modelling Code, prepared by our Excel Community.