Inside the mind of a spreadsheeter vs a financial modeler

financial modeling

INTRODUCTION

There is certainly a big difference between a spreadsheeter and a financial modeler.

However, the problem is who draws that line and determines who is placed on either side of it.

I have met, witnessed and trained many people over the past 20 years and it is still amazing to see how wide this spectrum can be, not to mention the opaqueness of that line.

Apart from there being no single method of measuring this difference, you will even struggle to get a bunch of expert modelers to agree what are the definitive criteria or standards are to follow in order to draw that line very clearly.

Everyone is scared the other might “own it” and desperately hold onto their own approach so sadly there are 3 that would call themselves a financial modeling standard.

We prefer to use BPSMS (was the first standard developed), but in reality they are all very similar in overall approach and consistency.

I even saw a list of formulas on the axis of evil by a leading accounting firm, yet a world champion proceeded to use one of those “evil” formulas in his demonstration during a Modeloff Global Training Camp.

So it would be very dangerous for me to even attempt drawing such a hard line but I can certainly attempt to layout a framework.

I will try explain and give readers food for thought when looking at the mindset of the two, which is more based on me having met thousands of Excel users across Australia, South Africa, Sri Lanka, India and Hong Kong.

Having previously transitioned myself from a spreadsheeter to a professional modeler, I can’t even say exactly when it was that I moved over to the other (perhaps dark) side.

Perhaps the day I unplugged my mouse and started to use only shortcut keys.

Or was it the day I learnt Index(Match) and no longer used Vlookup or perhaps Offset or my first copy/paste and goal seek macros….nah…has to be that day I started using data tables or a solver driven macro button.

Now you can see the problem.

Here is a short list that hopefully helps people assess personally where they might be and what might need to change to progress toward improving themselves toward being as a Financial Modeler and away from being a Spreadsheeter

SPREADSHEETER

  1. Believes he/she has little if any errors in their spreadsheet and denies or avoids thinking about them.

  2. A spreadsheeter just wants to get the job done and will rush through the process, even occasionally hardcoding numbers in formulas to balance a balance sheet and hide it in other debtors or creditors when it might be out of balance. Or have a “balancing item” / “historical balancing” as an unreconciled difference. Maybe make other assets equal the difference between net assets and total equity to force a balanced balance sheet…I know all the tricks because I used them a long time ago.

  3. A spreadsheeter likes the fact that their spreadsheet is really complex in its design which nobody, apart from them, is able to interpret what is contained in it. Even the simplest of tasks identifying where the assumptions are located is a game of hide and seek within the spiderweb of formulas. They aim to make things complex (job protection).

  4. A spreadsheeter takes days sometimes weeks to roll forward spreadsheets and lots of manual copy and paste. They will spend more of their time preparing it and little time analysing, running sensitivities and scenarios. Its rare you will find scenario and sensitivity analysis in the spreadsheet. They might even use the words “it is what it is cause the model says so”. It’s like the model has it’s own brain and can never be wrong or changed dynamically. Spreadsheeters hardly ever build macros to automate the complexity.

  5. The spreadsheet would and could never be served to anyone, let alone a queen. The intention is not to ever explain or show it to someone in detail only to create a few fancy dashboard which are then printed or saved to PDF format so nobody has to look under the hood. It’s not pretty for those that have had the pleasure of having to review another spreadsheeters spreadsheet when they go on leave or change jobs. I had 2 staff members that struggled for weeks to switch roles purely due their different spreadsheeting skills.

  6. Spreadsheeter uses their mouse a lot and knows very few shortcut keys apart from Ctrl C (copy) and Ctrl V(paste) (which they use a lot). Maybe occasionally Ctrl S (save).

FINANCIAL MODELER

  1. Recognises that all spreadsheets will contain errors when first built and therefore actively develops error trapping and reporting/flagging within a model to detect and resolve them.

  2. A modeler actively goes looking for errors and writes formulas carefully to minimise errors and enforce consistency. A balance sheet that doesn’t balance is a cardinal sin and worthy of punishment by public humiliation.

  3. A modeler builds models so they are easily navigated and well structured. Whilst the formulas might be complex depending on the business logic and flexibility the Modeler strives to enable others to easily use and navigate the key assumptions and outputs. They aim to make things simple (it’s actually harder to make complex models simple) so others can use and navigate it.

  4. A modeler will find every angle possible to reduce the time spent on updating a spreadsheet so that they can spend more time on possible scenarios and potential impacts of changes to key assumptions. The modeler recognises it’s a matter of relativities across different scenarios rather than an absolute single outcome. Not matter what the model reflects as outputs it will never be 100% accurate. A modeler would use macros and probably run Monte Carlo simulations if required to lower error risk.

  5. Presentation is key. The model is built as if it were an expensive cuisine being served to the queen. There would certainly not be a bunch of excel errors hanging around like egg shell pieces in scrambled eggs. Not really a pleasant experience eating egg shells.

  6. Financial modeler hones his/her shortcut key strokes and might even remove the mouse all together. They are also known to remove the F1 key as its just a waste of a key and given the frequent use of the F2 key (to understanding basic formulas and logic) is right next door.

CONCLUSION

There are sadly a lot more spreadsheeters out there than modelers (2% of Excel users would be professional modelers), however fear not as there are tools and educators to help, like me and others.

There are literally truck loads of free online materials and YouTube channels to get up the curve.

I was once a spreadsheeter feeling proud that I was the only person that could understand what I had created.

Whilst I thought this was a great place to be, I soon realized that the painful process of maintaining the spreadsheet all by myself eventually became boring and I could use my time to add more value outside the spreadsheet through conversations whilst the spreadsheet was merely the decision making tool, not the bible.

Being able to drive real business conversations and help drive performance face to face with people and not behind spreadsheets is truly life changing.

We are human and whilst machines can do a lot for us, right now influencing decision making with other humans still needs our experience, our personal connections and care for others being successful as it’s the best way we too can become successful.

I encourage you to also take a peak at my past/present articles on financial modeling which is the foundation of business decision making, planning and forecasting.

We have also redesigned our website to help you along your journey of levelling up in this space.

We will continue to discuss this topic and you can click to follow me on Twitter or LinkedIn or subscribe to our short but sweet newsletter.

Be sure to check out our pods and video page.

Here are also some past/present blogs that might be of interest.

Forecasting skills doesn’t guarantee good modeling skills

How Technology Will Change FP&A Forever

Why so many unemployed accountants are already struggling..and how I can help?

Father battles cancer, son battles career extinction

Why being a 1-man/women VCFO business is a really bad idea?

Why Vlookup (vs Index(match) shows your lack of embracing change, innovation and better Excel skills

Why a Truly Integrated Business Planning Solution Requires a Flexible Dual Architecture known as Core and Edge.

Excel is dead!

Financial Modeling Innovation: Predictive analytics vs Financial Modeling

Financial Modeling: Diamonds in the rough

Why Monte Carlo will change the way you make financial decisions and think about scenarios?

Driver Based Planning & Forecasting in the context of FP&A

Virtual CFO the Good, Bad and the Ugly

Part 3 of Finance Innovation — The Airbnb of spreadsheets — first major wave of spreadsheet innovation

Do You Model Off against the Masters of Financial Modelling?

NEED HELP searching for the best advisory tool in the market?

Part 2 of Finance Innovation — Data Analytics / Big Data is not Financial Modeling

Why I disrupted my own role and you should do the same?

Consulting, Advisory, Finance and the art of influencing is about to change forever.

Your Financial Model can save lives !

The Machines Are Not Coming… they are here!

Why financial modelling skills will be a big career door opener for emerging accounting and finance talent.

The Demand for Financial Modeling Skills Reaches new Heights

Lance Rubin is the Founder of Model Citizn, partner of theOutperformer, approved training provider to the Financial Modeling Institute and Group CFO for SequelCFO.

I have more than 20 years of combined experience working in model audit, investment banking, corporate finance, finance business partner and Fintech CFO.

Organisations I have worked with include PwC, KPMG, National Australia Bank, Investec Bank and Banjo small business lender.

I have a YouTube channel dedicates to the Future of Financial Modeling and also provide access to Models via Eloquens with thousands of viewers and downloads.