We work with plenty of clients on building data-heavy enterprise models to meet their needs. The models include functionality to accommodate actual financial figures, budgets and forecasts. A recent example is a large business model with five subsidiaries. It has the ability to store budget copies and a detailed report pack, and requires an update of monthly trial balance actuals. Another example brings the latest month’s sales data into the Excel model, deals with new customer data and includes a dashboard.
It’s easy to forget that, once built, a model needs ongoing maintenance. That’s because things never stay still. Requirements change, for example:
- Acquisitions that require newly-acquired subsidiaries to be added into the model
- New products being added to a business
- Uncontrollable factors that create a need for sudden reforecasts / budgets, such as recessions, Covid-19 etc.
So: who is best placed to undertake ongoing maintenance? And when should you consider outsourcing ongoing maintenance?
Five reasons to outsource financial model maintenance
If you are thinking about updating a data-heavy model yourself, here are some reasons why you should consider a model maintenance contract instead:
1. A high risk of getting things wrong in combination with boring repetitive tasks
Some activities – such as driving a high-speed train – require considerable attention to detail over a sustained period. Not everyone is suited to such an activity, but the consequences of attention drifting can be disastrous.
I’m not suggesting that preparing a monthly financial reporting pack is like driving a high-speed train, but the risk of your attention being distracted by boring, repetitive tasks is the same. Completing such routines yourself means you are less likely to focus on the quality of reports generated, completing analytical reviews, interpreting variance analyses, providing management insights and generally preparing to present a coherent message.
Clients who ask us to “update the model for the latest actuals” know that we will run all the necessary repetitive tasks, routines and checks that allow them to focus on higher-level activities.
2. Model integrity is essential
A team of experienced financial modellers has the confidence to break, re-design and put back together financial models in the light of ever-changing requirements.
That reduces the risk of mistakes or, worse, latent defects (that are only uncovered months after the in-house modeller has moved on).
3. Continuous and immediate access to expertise over the long-term
A maintenance contract gives you ongoing access to a professional modelling team whose core business is providing what you need. And because the contract is long-term, there is minimal administration when work is required.
What’s more, valuable knowledge of the model and how it works is built up and retained by those delivering under the maintenance contract. A sense of ownership quickly develops – meaning productivity and efficiency gains.
4. Over-reliance on a single employee is seen as high risk
Employees maintaining financial models can cause disruption if they move to another employer. Under an outsourced maintenance contract, services are provided by a team of expert financial modellers with built-in career development and succession plans. If that team is working to the same set of best practices, modelling standard and core methodology, then changes in personnel are easily manageable.
A team of modelling experts also has an important role in bringing their new clients’ employees up-to-speed in what they are doing. That’s often more efficient than activity handovers led by the employee who is about to leave.
5. Certainty of costs can be valuable
Keeping a non-core activity in-house carries with it a high opportunity cost: could the people involved have been better deployed elsewhere – perhaps on core activities? F1F9’s maintenance contracts are based on a monthly retainer charged for a minimum 6-month period. This covers work requested on an ad hoc basis, plus quality control checks to offer assurance that updates have been completed properly.
To learn more about our modelling services and maintenance contracts, please contact us.