This is a guest post by Sohail Anwar.
Why do so many of us use Excel? Let’s trace it back to the ’80s when Microsoft hit gold by being the first out of the blocks with the widely available operating system that was somewhat dummy proof.
Suddenly everyone could aspire to launch ‘Nukes’ like a fresh faced Matthew Broderick in the film ‘War Games’. 
By the early 90’s Windows had become even more established relative to other Operating Systems, so much so that PC manufacturers were developing components around Windows’ capabilities and suddenly PCs were Windows machines. As big business began accepting the significance of computing, Microsoft started winning huge licensing contracts with all the major corporations in all sectors, but the Finance sector in particular, where Excel would be king, was having an exponential boom at this time. For big organisations, once you spent a fortune buying licences for the Operating System it only made sense to purchase the seamlessly integrated and carefully developed/tested apps to run on them; enter Excel, Word, PowerPoint and eventually Outlook. Fast forward to 2015 and we are firmly in the age of second generation corporate professionals who have developed much of their productivity skill sets around those particular Windows tools. While all the excellent tools have their place, Excel stands out and here are 8 reasons why you need to up your Excel game more than ever this year.
1. Excel is a universal language spoken in almost all offices
For those who work in the field of Finance, it’s more common to hear ‘Excel’ than it is to hear ‘Spreadsheet’. Such is the ubiquity of Microsoft’s brilliant application. Of course the purists will tell you 279 reasons Excel is not as good as ‘insert competitor product’ but the reality is 1) Purists aren’t coming from a pragmatic perspective which modern multi-skilled professionals need to be and 2) as mentioned in the intro, like it or lump it, Excel is everywhere!
2. Stop thinking of Excel as a spreadsheet
It is a problem solving tool. I’m not saying it’s not a spreadsheet, accountants and financial analysts will often use it as a traditional spreadsheet but this is just a fraction of what it is capable of. So many other professionals will not correctly harness the awesome power of Excel because they believe it to be nothing but a boring spreadsheet application that deals with boring numbers. Case in point, three of the most common uses of Excel in my work include dealing with Text data, i.e. Lists of people from HR databases that need to be reconciled with other sources, sending out large volumes of tailored emails and creating PowerPoint presentations automatically! Those aren’t the things most people associate a spreadsheet with.
3. Create more time
The most precious commodity on Earth which cannot be replenished is your time. The better you become at leveraging Excel, the more you will be able to achieve. First the speed at which you are able to solve problems will increase and eventually if you get good with VBA then full on automation will save you hours per task. You cannot put a price on the time you will save; it will free up your own time to provide more value in your team, develop yourself in other ways (more skills or attributes), free up time to work on a side business/ hunt for a better, higher paying job or of course you can spend more time trying to break your candy crush high score!
4. Excel is not going anywhere
Excel will be around for a very long time. Big companies cannot easily migrate from established platforms and applications. Case in point, two of the banks I have worked for in the last few years still insist on the archaic 90’s Lotus Notes as their main communication tool! It’s not just the cost of doing so but in the case of Excel in mid to large organisations, Excel is a part of working culture. Even if companies would move, there is no all-encompassing rival, developed and supported by a reputable enough organisation on the horizon, compatible with all the bespoke .NET application development that goes on within organisations (which is designed to integrate with Excel). As a note, the trillion dollar business of Foreign Exchange currency trading as well as most other forms of trading still have most of their analysis work carried out in Excel in almost all financial institutions.
5. Small Data
Big data is so 2014, 2015 is about the rise of small data or local data; it has grown considerably in the last few years as companies have been spending more and more money on CRMs, ERPs, essentially databases. You need to be able to gather data, analyse it, draw some conclusions and present those conclusions as intelligence to decision makers. Don’t get left behind. I have worked with Project Management software like Clarity and most frequently SharePoint (content management)., With the likes of Clarity and other data repositories, you can extract information in formats that Excel likes (.xlsx, .txt & .csv) and then go about getting useful insights and creating reports.
6. Excel is like an analytical sketchpad
Excel is to an analytical professional what paper/pen is to an architect. I have pitched many ideas and models to my bosses by translating my wacky concepts in my head and interpreting those ideas in Excel, especially around finance, budgets and general reporting.
7. Value networking
This is my term for what in my career has turned out to be the best form of networking, not arbitrarily pestering people for coffee meetups but using that time to reach out to someone and make their life a little bit easier. Due to its universal nature, Excel has allowed me to proverbially raise my hand and say ‘I can help with that’. And I did help, helping peers alerted senior colleagues to my abilities and when the senior/Execs started reaching out me for my help, it opened up a whole new set of doors for me which meant good things for my career.
8. More Excel skills make you more marketable
Excel does not represent one skill on your CV, it represents a huge category of skills. In the age of keyword search hiring, you need to understand that simply writing ‘Excel’ or ‘Advanced Excel‘ will seriously undersell you to prospective employers. Use actual Excel functions in your Resume!
Pivot Table, VLOOKUP, Macros, VBA, Conditional Formatting, Charting and filtering…These are far more telling of your ability to an employer then writing Excel. Someone who writes VLOOKUP, Pivot Table, Filtering demonstrates an ability to analyse data and so has eliminated a potential barrier in the mind of the hiring manager reviewing the CV. Simply writing ‘Excel’ on your CV shows you can work with Excel, writing Pivot Table shows you can work with Excel and make it analyse data for you. Excel skills progression correlates well with earnings; the more you improve your Excel skills in a meaningful way to add value in an organisation, the more your earning power goes up.
To give you an example from my own career and many of the colleagues I have worked with and helped over the years: fairly intermediate skills took my earnings from £27k to £40k, getting very good with data analysis took me to £64k, intermediate level VBA took me to the £100k mark, becoming exceptionally good with VBA helped me climb eventually to £140k+. Bear in mind, blindly learning Excel is not something I advise, instead the method for improving is to find opportunities in your work to be more productive. In parallel to improving my Excel skills, I was developing other key attributes too such as Project Management, Reporting expertise and communication. It was exposure to problems in those areas that gave me reasons and opportunity to apply my Excels skills and solve very specific and niche problems which helped me stand out from the crowd more. People think you need to be a VBA god to break the 6 figure mark. When I did it, I was okay but spent a lot of time Googling and making lots of mistakes. When I helped a friend of mine do it she was at best able to manipulate other people’s code, her brilliance was in understanding where appropriate to apply solutions, speeding up and automating is what an employer values, not how pretty your code is.
Conclusion
Is Excel perfect? Maybe not for all scenarios but it’s damn good and for professionals, especially those working in or with mid to large sized organisations and who are (always should be) looking for career development, improving your Excel can go a long way to improving your overall offering as a professional.
Added by Chandoo
Thank you Sohail for echoing my views. I was skeptical to publish this post as it mimics the theme for our podcast session 27 – 15 ways to get awesome in Excel in 2015. But there is no such thing as enough awesomeness. As a community, we are thirsty for more good stuff, all the time. Plus when was the last time you heard both Klingon and Excel in same sentence.
Please share your views about this (not Klingon you silly, about learning Excel) in comments.
About the Author
Sohail Anwar has been hustling and hacking for over a decade in his professional life. He likes to go on about the fact that he’s spent over 10,000 hours applying Excel in the work place and is quite good at it. Download his FREE e-book “20 Ways You Are Preventing Your Salary From Rising” which will benefit professionals who use Excel and feel free to connect with him on LinkedIn
62 Responses to “Introduction to Financial Modeling using Excel [Part 1 of 6]”
Oooh! Chandoo - are you looking to outperform the Altman Z-Score?
I'm all ears 😉
Many thanks, Paramdeep. Looking forward to the remaining parts of the series
Thank you Paramdeep. I look forward to following the series.
Those interested in Financial Modelling may also find this site interesting:
http://www.fimodo.com/
Hi Chandoo,
Really looking forward for this awesome financial modeling journey 🙂
All the very best..
Regards
Rohit1409
Hi Chandoo,
it seems the future is not away when we will have a new software/spreadsheet as competitor to Microsoft Office/Linux etc.......Hats Off to you..
KEEP SMILING
GURU
@apex, clarity: Thanks...
@all: I do hope that you have started creating the model for the simple case given.. Lets see, what according to you all is the best way forward. So your views on the best practices for the template for valuation?
The planning process varies depending on the project and type of data I am looking at.
If I am doing a cost impact study based on actuals, verses a cost impact study to estimate future cost, verses reviewing historical data then creating a model, verse having to review historical data, apply it to a draft model, update the model based on the draft outputs and the presentation then sometimes repeat the process a few times.
Revisions are an absolutely necessary part of corporate financial modeling especially for the presentation sections. A good presentation will be revised multiple time. There are just to many elements which cannot be planned for, especially with ad hoc reports/models.
Revisions are leading cause of errors, and time spent tracking down errors. The more complex the model the more important revision control is. I would be interested in a section on revision control and good methodologies to determine the effect of changes on models. That is without having to due detail review of the whole model over again.
Hi Paramdeep,
I can't wait for the continuation of this series. You have done a great job in making technical terms appear simple and easy to understand. This article is also very useful in our line of business, in fact i will be featuring this article in our site. Of course the credits will go out to you.
Many thanks and keep it up!
Drew
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@Drew: Thanks! Hope that you found the tutorials useful. Feel free to get back with any queries.
[...] you are building financial models or any other type of excel based decision models, chances are, there will be multiple scenarios in [...]
Great information, i also want to learn financial modeling, how to learn
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chando bhai i m tired for looking financial modeling detail but i cant find it anyway. so plz kindly send me full detail of financial modeling from beginning levelo to final. where i learn complete modeling procedure n order to become professional
You noob, you won`t become a professional like that, you need to do it on your own and learn as you go
@Nadeem Bhai,
The 6 links to the tutorial at the top of this post, build a small integrated financial model step by step. We are also running a complete 8 weeks course on financial modeling (similar to excel school). But that is almost 50% complete right now. If you want to join, you can join the next batch (probably starting in Jan/ Feb)
Feel free to get back, if you have any queries regarding the model/ steps in creating the same
[...] you do not wish to join our course, we are still cool. Here is a 6 part training on financial modeling & 2 part training on project finance. They are free, fresh and [...]
I want to learn how to build a financial model
Dear Lulama,
You can use this tutorial to learn to build a financial model. We also run a course on financial modeling and project finance modeling. The details can be obtained from:
http://chandoo.org/wp/financial-modeling/
You can consider joining that as well.
I would strongly encourage you to join the newsletter to get the updates about financial modeling and the next batch starting for the course.
I want to learn thorough excel and financial modelling thing !!! I am a chartered accountant..CAn you please suggest a detail syllabus that should be learn by me. Also suggest any classes that would cover everything in excel and financial modelling related things.. I stay in mumbai, so please suggest a class in mumbai or any books..byyee.. thanks ..
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Hi Vivek,
We do conduct the financial modeling course online as well as in Mumbai. We start with the basics of excel and build a completely integrated financial model in the class. For details you can look at:
http://chandoo.org/wp/financial-modeling/
or
http://www.edupristine.com/courses/financial-modeling/prisitne-fm-offering
Please describe to me various type of financial modela and demonstrate how a model can be build.
Regards,
Dear Immanuel,
This series of articles does exactly that. If you go step by step through the articles and create the excel sheets on your own, you will understand how to create an integrated financial model.
Alternatively, if you are looking for video sessions, you can consider joining our course:
http://chandoo.org/wp/financial-modeling/
It is expected to reopen somewhere in mid july.
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Thanks Paramdeep this is great!
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Paramdeep Hi! A bit ignorant here, but let's ask anyway. Can I access "recorded" video sessions apart from following the step by step articles?
Thanks!
@Marius: Yes, we do have a training program with recorded video sessions. If you are interested, you can enroll for the same. The details can be obtained from: http://chandoo.org/wp/financial-modeling/
i want to know about the scope of financial modeling.i also want to know after doing financial modeling course what are the job prospect, like where i can found job so plz send me full detail of financial modeling from beginning levelo to final.
I am interested to join your Financial modelling class cos am involved in a new business. But I have a Macbook Air with Excel for Mac installed. Would that work with your program?
Dear Charsiew,
The complete training program is built using Excel 2007 with MS windows. Though there is nothing specific to Microsoft in the training. I think a few people have joined the program and are using MAC. If you write an email to me on paramdeep @ gmail.com, I can send you the email ids of those participants and you can get to know their feedback and difficulties in using the program.
This is great, when does the next batch start?
Dear Karan,
The course is in recorded format and you can register for the same as soon as you want.
Paramdeep, thanks. I'm venturing into financial modelling for the first time and from the little I've read from your website already, I'm sure I'll find your resources very useful; thanks once again.
Dear Seun,
I am glad that you are finding the resources to be useful. Feel free to send in comments with your feedback and further questions.
hie ppl...I jst wantd a small favour cn smone help me out in calculating EBITDA, along with its working, from wipros annual report 2011-2012, link - http://www.wipro.com/investors/annual-reports.aspx
...PLZ plz... i am having a submission tommorow.
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Nice article.
In designing Excel Financial Models I design the user interface as friendly as possible and structuring the input variables in the workflow of the client's operations so that they can flow through the impact of the input variables in Excel using buttons and macros and giving the model transparency.
Cheers
Arthur
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Another step to build any financial model is to do a financial analysis beforehand. This normally helps to design and come up with good projections.
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