Improving your financial modelling skills: why it’s worth it

Investing in financial modelling training

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13 Apr 2017

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Guest blog post from Steven O’Neill on why it’s worth investing time in improving your financial modelling skills.

As someone working in the area of talent acquisition for finance professionals, I often ask myself why is it that some candidates’ careers skyrocket while others seem to flat line.

It’s a question of which there are many possible answers. A person’s interest in work, suitability, luck, contacts and aptitude all spring to mind as potential reasons. That said, I see one thing in common with those who perform well: their ability to see the big picture.

But what does that phrase really mean? And is it something we can all strive for in our professional lives?

Let’s consider it in the context of those working in finance. Seeing the big picture is being able to identify the key levers of a business and understand how to optimise them for the benefit of the organisation.

People who invest time in understanding this are the ones who tend to be good at what they do. And as a result, they are also the ones who can articulate in a meaningful way what they’re trying to achieve. They know how they intend to do it and why theirs is the preferred route to take.

Central to building this skill is the ability to model business scenarios in order to give some view of potential future outcomes. Whether it’s producing a full suite of projected financial statements or a simpler standalone return on investment analysis, solid financial modelling skills are vital.

As accountants, we are often fooled into thinking that possessing such skills is a birthright that goes with the profession. However, this is simply not the case. Like everything worthwhile in life, it takes time and practice.

So from a recruitment perspective, here are three key reasons I believe investing in your financial modelling capability is worthwhile and can help you to stand out from the crowd:

The emperor has no clothes
I find accountants tend to overestimate their ability to use Excel. In fact, many try to highlight their use of pivot tables and Lookup functions as proof of having advanced skills. However, there is a very significant difference between someone who understands some of the well-used functionality of spreadsheets versus someone who is able to construct a robust financial model used to underpin key decision making.

Simplicity is in fact complex
Being able to string together fifteen nested IF statements is not a badge of honour. It just means you have failed to produce a model that can be easily followed by others (and yourself, as over time even you will forget what you were trying to do!). The most impressive people I’ve come across are those who can explain complex situations in a simple matter of fact way. What’s more, they have a knack of keeping it simple even as complexity grows. Being able to build out models in a modular format will enable you to do this. The good news is that it is something that can be learnt.

The world has moved on
When I started out there wasn’t a whole lot of financial modelling going on. I think looking back there were several reasons for this – computing wasn’t what it is today, so in many ways, you were more restricted in what could be done. But also in a world just embarking on the internet revolution, there was probably less complexity/risk out there (whether this was real or perceived we can debate some other time!).

But there’s no doubt the world has moved on. We now have computing packages that can be used for quite elaborate modelling and visualisation of data. But equally, the world has become even faster-paced and trying to predict the future is more challenging. In this context developing your IT skill set is essential.

While there are many online tutorials on modelling out there, the F1F9 courses are really well constructed and all encompassing. Having completed two F1F9 financial modelling courses I can say it delights me to know that such learning materials exist, as it is in all our interests to be able to build and share models to support better decision making.

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