After more than 30 years of good and loyal service, the hegemony of Excel in the financial modelling space is facing its most serious challenge yet. Anaplan – a leading cloud-based forecasting tools in two of Gartner’s Quadrants – has already won many famous clients, seeing its revenue increase by a whopping 75% in 2016.
When do you know you pushed Excel too far?
With more than 650 million customers around the world, Excel is used for an incredibly wide spectrum of purposes. However, many financial analysts familiar with complex models spanning over numerous worksheets will be surprised to know that only 4% of Excel workbooks created globally contain formulae.
In fact, few professionals push Excel as far as financial modellers do and it’s no secret that Excel sometimes struggles to cope. We’ve all heard horror spreadsheet stories involving input files sent out to tens of controllers (then having to be manually consolidated), errors in strategic models or templates, the struggle of reporting analysts to get their data in the right format or more generally, the dreadful amount of time spreadsheet management requires.
From a modelling perspective, one of Excel’s most significant shortcomings is its scalability. Imagine a retailer developing a business plan model to forecast the performance of its 50 stores against their budgets. This simple example would already translate into a rather large Excel model including more than 150 positions (50 stores times 3 versions for the budget, the actuals and the variance). And once the model is built, changing the calculation logic of any given line item can soon turn into a nightmare, as it will need to be amended for every single store.
Leaving the constraints of Excel’s two-dimensional world and moving to Anaplan’s cube, building and maintaining the same model becomes a walk in the park. Since stores and versions can be defined as dimensions, profit and loss calculations need to be entered once only. The result is a single profit and loss account, which can be viewed for any given store (or on a consolidated basis) and for any given version. Amending the calculations in the entire model is as easy as updating a single Excel formula and is reflected throughout the whole model in real time. All that’s required to add a new store is typing its name in the store list, plus there’s no need to manually replicate and link the inputs or to adjust the consolidation and the outputs. Wait a minute, could this be the answer to spreadsheet chaos?
The cloud’s advantages
In addition to its scalability, Anaplan offers great advantages in a corporate environment. As it’s a cloud-based solution, input providers can fill out the assumptions fields directly in the master version, making Excel input sheets sent per email and manual consolidation redundant.
Moreover, Anaplan provides a single, real time source of truth as its connectors and import functions ensure that parameters are always up-to-date. Even better, the access rights can be tailored so that each user only sees the sections of the model relevant to them. So goodbye data security problems.
Finally, reporting analysts will love that Anaplan’s cube works like a giant pivot table, where switching dimensions and changing the way information is presented can be dusted in a matter of seconds.
Flexibility is king
But let’s not burry Excel just yet. It’s still got some very strong assets to play. To start with, Excel is readily available in most companies and many professionals are familiar with it. In fact, it’s the only programming language many people know. But the real key to Excel’s success in controlling divisions and the financial modelling space is its flexibility.
In the world of Corporate Performance Management though, Anaplan is arguably the most flexible tool available on the market. Similarly to Excel, Anaplan relies on formulae and users start from a blank page, offering an extensive range of applications, such as budgeting, supply chain management, compensation planning, … the list goes on.
A technology-agnostic approach to modelling
For the first time in 30 years, financial modellers and controllers do have a genuine alternative to Excel. To us, this marks the beginning of technology-agnostic forecasting, where we’re able to choose the best-suited tool to solve the problems our clients are facing.
When switching from Excel’s two dimensions to Anaplan’s n-dimensional world, utilising a tested modelling approach and applying clear design principles becomes even more crucial. Regardless of the chosen technology, we always rely on PwC’s Modelling Methodology – a structured project management process based on more than 15 years of experience – to translate complex situations into insightful financial models. Similarly, our Design Best Practices and Rules enable us to ensure that all our models are transparent, flexible and user-friendly.
So who deserves the modelling crown? In a business-as-usual environment, Anaplan’s many advantages, combined with its easily changeable model structure are a true revolution. But Excel still hits the mark as it is better suited to deal with the fast-changing conditions and the short timeframe associated with M&A transactions. As Excel certainly won’t give up, the fight goes on…
