Excel Sucks at Financial Modeling

I don’t see how you all put up with it.  I’d pull my hair out.  I’m talking about using Excel (or any spreadsheet tool) for financial modeling.  To build and maintain financial models, that is.  It’s fine if someone else built it for you , and all you have to do is put in a few numbers in well-marked locations, and view the results.  And as long as you don’t have to trace back a formula so see how something was calculated.  As long as there is no need to make sure the same calculation is used for each column in the model. Yikes, have you seen those formulas?!  If anything is referenced outside your viewing area you are screwed.

Now don’t get me wrong.  I love Excel.  I use it every day.  I import and store lists.  I sort things.  I maintain small databases.  I keep a log of how many miles I ride my bike each day.  I have another spreadsheet I use to keep track of my daily calorie consumption, exercise, and weight.  It helped me lose 40 pounds, and keep it off still 5 years later.  Like I said, I LOVE EXCEL!  Just not as a financial modeling tool.

I’ve been spoiled.  I’ve used an English like financial modeling language of one sort or another since 1977.  (I’ve created two of them myself).  My tool of choice nowadays is ENCORE! for the financial modeling language, and SurvivalWare for the infrastructure – i.e. getting data in, analyzing, reporting, graphing, exporting data to the dashboard tool of your choice for mobile and web access.  Fortunately, you get these as a bundle when you buy SurvivalWare Pro.  But I’d advise you to wait until the release of SurvivalWare Pro 2014.  It is available in Beta test form now, but the formal release is scheduled for July 15, 2014 to accommodate a major refresh of documentation and training videos.  There is a lot of new stuff including a Model Generator to make you incredibly efficient at developing models, without sacrificing the ability to fine tune calculations and report formats.  Transparency is another big thing. Click on the new formula bar to see the English-like logic for any row in the grid.  I could go on and on.

But back to my rant: Excel sucks as a financial modeling tool.  There is just no other way to say it.  I’m sitting here having to update the Simple Model Excel template file.  I made some changes to the simple model based on suggestions from Philip Campbell after he used the model in a real live client engagement.  The new “Disposable Spreadsheet” feature in SurvivalWare depends on a working Excel model that mimics the calculations of the Simple model.  So I’ve been updating the Excel spreadsheet this morning, trying to figure out the cell references, and looking for any excuse to do something else.  SurvivalWare Simple 2014 isn’t scheduled to be released until May 15th – so I have lots of leeway to procrastinate – over 2 weeks to update the formulas in a measly 150 row model.  

Back to the grind: let’s see, here’s my formula for Annualized Sales down at row 49: =(B5+C5+D5)*4.  Let me scroll up to the top to see what Row 5 is.  And what columns B,C, and D represent.  Now is this formula for October the same? =(I5+J5+K5)*4.   Is that an I or a 1?  So far so good.  And here is Cash Flow From Operations for October: =K111+K112+K113+K119+K126.   It doesn’t exactly roll off the tongue.  You get my drift.  This is the simple stuff.  Imagine a complicated model.

I picked a hell of a time to stop drinking!