SPECIALISTS IN FINANCIAL MODELLING

Why I use Excel

Excel

I’ve been consulting, writing, training and speaking about the use of Excel for analysis, building financial models, budgets and dashboards for many years now and I’ve lost count of the times I’ve been contacted by software providers who’d like “my opinion” on their new software or add-in to Excel which is so much better than plain or, as I like to call it, “vanilla” Excel. Seriously, I get messages about this All. The. Time. So I thought I’d sit down and explain my views on why I stick to Excel.

Having written several books on the subject and hence committed a large part of my career to the use of Excel, I’ve had to seriously consider that perhaps I’m too stuck in my ways to consider any of these new tools. The title of my first Wiley Finance book which has been revised and published three times and sold thousands of copies was “Using Excel for Business Analysis,” so I guess you could say I’m pretty invested in the success of the software.

Despite my investiture in Microsoft Land, I’m the first to admit Excel’s shortcomings; the most significant of those being firstly, the ease with which errors can be made and secondly, the way that it handles large quantities of data. Microsoft seems dedicated to addressing these problems with many of the new features in Modern Excel. The use of tables, dynamic arrays and not to mention good modelling practice can reduce the structural error problems, and the data model feature of Power Query/Power Pivot/Power BI has increased the capacity of the amount of data that can be processed in Excel.

Even with the new features of Modern Excel, we still consider it to be the “Swiss Army knife of software” or the “second-best solution” because although you can do practically anything in Excel, but it’s not always the best tool for the job. For example, you could write your To Do List in Excel but there are a thousand task management apps that will integrate with other systems and do a much better job. You can keep your company accounts in Excel, but a purpose-built general ledger system will deliver a much better result.

So, why do we still use Excel, even though a better solution might exist? For building a financial model, putting together a budget, or analysing a new business opportunity, you’d be hard pressed to find a more suitable tool. Here are some of the main reasons most finance professionals choose to use Excel over a potentially better solution:

  • Every business already has Excel installed. You won’t need to purchase extra licenses or pay for expensive consultants to install it.
  • Little training is needed. Most users have some familiarity with Excel, which means other people will be able to edit, change, and understand your Excel model.
  • Excel is so very flexible. You can build almost anything you can imagine in Excel (within the size limitations of the data model, of course).
  • Excel “talks” to other systems very well. With Power Query in Excel or Power BI you can report, model, and contrast virtually any data, from any source, all in one report.
  • Most importantly, Excel is commonly used across all industries, countries, and organisations. This means that the Excel skills you already have, and the skills you’re currently working on. You can use those skills in other jobs at other companies no matter where your career takes you. Sure, there are thousands of other pieces of software that you can learn, but I truly believe that for a career in finance, one of the best things you can do for your career is to improve your Excel skills.

Of course, I can’t predict the future, but it’s difficult to imagine a world where Excel is not the dominant finance software. So, next time you’re deciding which tool to use, consider whether it should be Excel, Excel or Excel.  And thank you for getting touch but I’m not interested in using, recommending or selling your new software tool for you.

Sensitivities, Scenarios, What-if Analysis – What’s the Difference?

Financial ModellingScenario analysis, sensitivity analysis and what-if analysis are very similar concepts and are really only slight variations of the same thing. All are very important components of financial modelling – in fact, being able to run sensitivities, scenarios and what-if analysis is often the whole reason the model was built in the first place.

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Excel Summit South Recap | Dashboard Webinars

I’m just back in the office after attending Excel Summit South here in Sydney last week and I’m still processing it all. For the past few years, some of the Excel MVPs from around the world do a tour Down Under and tell us all about the cutting edge features of our favourite software:) MVP stands for Most Valuable Professional awarded by Microsoft to just a handful of professionals in recognition for their contributions to the Excel community. It’s just a fantastic experience to have two full days surrounded by these experts of the industry. I had a great time catching up with old friends, and making new ones.

One of the Excel MVPs who presented at the Brisbane event is Mynda Treacy and I just wanted to let you know that her free Dashboard webinars have just been re-launched today and will be running for the next ten days. You can take your pick from;

• Creating Excel Dashboards
• Dashboards with Power Query & Power Pivot
• Power BI Dashboards for Excel Users

The live webinars are only available until 15th August but after that you’ll still be able to watch the replay.

Should Finance People learn Power BI?

Should people working in finance, such as financial modellers bother to learn Power BI? Whilst not a modelling tool, Power BI is incredibly useful for preparing, crunching and presenting data and there’s no doubt that Microsoft is truly committed to its place in the market with the speed and frequency of updates and feature improvements. 

When my “excel-lent” friend Chandoo visited me in Sydney recently prior to his presentation at the financial modellers’ meetup group, we had a good chat about all things Excel and modelling and decided to hit record.  He wanted to know my thoughts about how useful Power BI was for financial modellers. You can watch the video below, or you can find an in-depth break-down and analysis on his blog.

Budget vs. Actual analysis in Power BI – Webinar Recording

Watch the recording of this live webinar as we learn how to create a multi-dimensional model for your budget vs. actual performance data and how to create interactive reporting on it. Compare retail performance of Appraisal Owls (fictional company) over last 12 months and analyse results in Power BI. Chandoo (aka Purna Duggirala) is the founder of chandoo.org, an award-winning Excel and visualisation site which has over 50,000 members and 1.6 million visitors each month. 

Chandoo is returning to Australia this year in June for his Dashboard and Power Excel training Masterclasses in Sydney, Melbourne, Brisbane and Perth so if you’re planning to attend the classes, be sure to listen in to the webinar recording to get a sneak peek of what Chandoo has in store for these live classes!

If you watch the recording, you’ll notice that Chandoo assumes a bit of prior knowledge of Power BI, so don’t worry if you don’t follow it all the first time around. In his masterclass he starts from scratch and assumes just an intermediate knowledge of Microsoft Excel.

Enter your details at the link below to get immediate access to the recording, as well as the downloadable resources Chandoo made available during the webinar.

The Best Podcasts of 2018 for Finance Professionals

Best Podcasts for Finance Professionals by Danielle Stein Fairhurst

Last week I was interviewed by Matthew Bernath for his new show, “The Financial Modelling Podcast”.  We had a great chat about modelling trends, how to learn from other financial modellers and the meetup groups that I run in various locations.  Matthew is based in Johannesburg and I was pleased to host him as a guest speaker at our meetup group earlier this year on his visit to Sydney.

Podcasts are such a great way of learning and keeping up with trends on different topics so I thought I’d share with you my playlist and list some of my favourites for you. I’m sure this will give you a bit of an insight into my random and nerdy tastes!

PS – I usually listen to these on 1.5 times speed. Just because I’m always in a hurry.

  • My Excel Online Podcast with John Michaloudis. Episode publications are a little sporadic but he’s got some good interviews in there (even if I do say so myself – you can listen to my episode here).
  • From the Trenches – Real Life in the Accounting Industry. One of my favourites – very relevant for those in the Australian accounting landscape.
  • CPA Australia Podcast – Some subjects are a little dry but there are some great soundtracks from conferences.
  • Strength in the Numbers Show with Andrew Codd. Once you get used to his lovely Irish accent it’s good stuff, although the episodes are very frequent, so I don’t always get through them all.
  • The Deal Room with Joanna Oakey has interviews and tips & tricks relating to the world of business sales and acquisitions. It sometimes comes from a legal rather than a finance angle so every episode is not always relevant.

These ones are less accounting and finance, and more data visualisation:

  • Story Telling with Data with Cole Nussbaumer Knaflic. Another fave – always filled with interesting topics relating to data storytelling and presentation skills.
  • Policy Viz with Jonathan Schwabisch. Interviews from different data visualisation professionals.
  • Analytics on Fire with Mico Yuk and Ryan Goodman who interview their customers and BI specialists on business intelligence, analytics and design etc.

Here are a few that have popped up on my radar which look interesting so I’ve subscribed but I haven’t had a chance to listen to them yet:

Podcasts for Finance ProfessionalsThese are some of my other absolute favourites, in no particular order, not necessarily relating to finance and accounting but fascinating nonetheless!

  • Planet Money is very well-produced and looks at current events affecting the US economy in a fun, interesting way.
  • TED Talks Business probably doesn’t need a description.
  • No Filter – Mia Freedman chats to different people all with fascinating stories.
  • The Minimalists – How to live a meaningful life with less. Each episode is FAR too long but such a great message we all need to hear.
  • Big Ideas from ABC Radio National has recordings of the best of talks, forums, debates, and festivals, casting light on the major social, cultural, scientific and political issues in Australia.
  • Simplify from Blinkist. Recorded in Berlin, it’s all about simplifying your relationships, health, happiness and other random subjects.

Please feel free to let me know your own favourites and I’ll update this article if your recommendations make it to my subscribe list!

What’s new in Excel 2019/Excel 365, and what’s the difference?

Each time an updated version of Excel is launched, new features are introduced and subtle changes in the look and feel take place. The biggest change was way back when the big jump from Excel 2003 to 2007 occurred. The introduction of the Ribbon and change of file types caused all sort of difficulties for heavy-duty Excel users, financial modellers included. In the versions since then, the changes have been somewhat less traumatic for users and in recent years Microsoft has been moving towards a subscription-based model, making the changes incrementally rather than all at once.

Although Excel 2019 is technically not yet available, many of the new features are already accessible if you’re on the Office 365 subscription.  Whilst preparing the third edition of my first book, Using Excel for Business Analysis, I’ve been on the latest, most up to date version of Excel through the Microsoft Insider Program and have been using the new tools a little earlier than I would normally have done.

What’s the difference between Excel 2019 and Excel 365?

There’s not much difference between them right now in terms of functionality; it’s just a different licensing arrangement. Excel 2019 is the perpetual, bought-outright, stand-alone version of Excel and Excel 365 is the subscription-based version of the software.

Excel 2019

What is the difference between a perpetual and a subscription-based licence?

Historically, Microsoft has always sold a “perpetual” licence that is purchased outright and owned forever – I can still remember purchasing my first laptop together with a hideously expensive CD containing Microsoft Office. With this type of licence, the user does not receive any updates to their software until the next version is released and installed. Large organisations with many users that have purchased perpetual licences often wait several years before upgrading due to the cost and are usually at least one or two versions behind. This means that at any one time there has always been a wide range of versions in use in the general community. It is not unusual for me to run a public training course and have three or four different versions of Excel being used by different participants in the class. As a consultant, I have always had to take care to find out the oldest version of Excel the client is likely to be using and make sure that I don’t use any features or functions in the model that won’t work in their version of Excel.

Users with perpetual licences understandably become impatient because they don’t have access to new features they have seen or heard about, or because they cannot view or use or view the new features those with later versions have included in a model. When the upgrade finally does happen, the updates so eagerly anticipated by some, can cause confusion and frustration for others, either because they dislike the sudden new look or can’t find what they are looking for.

With subscription-based Office 365, updates are regularly released and any changes are gradual, which makes it easier for users to become accustomed to the differences. Organisations on the subscription model can choose their “update channel” which will determine how often updates are made, either monthly or semi-annually. In theory, all versions should be the same, but these differences in the frequency of updates means that not all users receive the updates at the same time.

Whilst it is possible to purchase an Excel 2019 licence, Microsoft is strongly encouraging users and organisations to take up the subscription option, presumably because they prefer the recurring revenue and stable cash flow it generates. As more organisations move to this model, the compatibility problem of users being on different versions will become less of an issue and should make my life as a trainer and consultant a lot easier! To seal the deal, Microsoft announced in 2017 than those running Office 2016 on a perpetual licence will be unable to connect to Microsoft’s cloud-based services after 2020, and I expect 2019 will have similar limitations.  It seems likely that Office 2019 will be the last version that Microsoft offers as a perpetual licence.

So, what’s new in Excel 2019 / Excel 365?

The following features are being introduced in Excel 2019 or to those with an Office 365 subscription:

  • Custom visuals, such as word clouds, bullet charts and speedometers which were previously only available in Power BI. (Note, as with many features of Excel, just because you can doesn’t necessarily mean that you should).
  • Microsoft Office now has full SVG graphics support plus the Excel application has 500 built in icons. These are now supported which look great on dashboards and infographics.
  • The Insights feature has been expanded upon. Click on a table of data and by selecting Insights from the Insert tab, several charts will appear on the right-hand side of the page to give you “insights” into your data. This is probably more of a data analysis tool than one for financial modelling, but still rather handy.
  • 3D Models which are fun, but I struggle to find a use-case for them in financial modelling.
  • You can create your own custom functions using JavaScript. It’s always been possible to create user-defined functions using VBA but JavaScript allows for greater interconnection. Again, this is probably not necessary for the garden-variety financial model.
  • Excel connects to Flow which you can use to create automated workflows to automatically collect data or synchronise data sources. This is particularly useful for automating data refreshes for models that need to be constantly updating, such as stock prices or currency exchange rates.
  • Excel also connects to Forms, so you can have a nice form user interface, with a very easy to use tool, that can be shared through a link.
  • Lots of new functions; most notably IFS, SWITCH, TEXTJOIN, MAXIFS and MINIFS.
  • Map & funnel charts; the latter is just a centred bar chart but map charts allow you to display data on a map using countries, states, provinces, and even zip codes / post codes. You can either display numbers as a heat map or colour coded.
  • Lots of new features in Excel’s ground-breaking Power Query data cleansing feature, including parameters, conditional columns & new transformations. Note also the name Power Query was changed to Get & Transform for Excel 2016 but has now reverted to Power Query, presumably to fit with the rest of the “Power Suite”; Power Pivot, Power BI etc.
  • Multiple users can edit at the same time with co-authoring if a file is stored on SharePoint or OneDrive
  • If you regularly change your preferences for Pivot tables, you can now assign a default behaviour for PivotTables.
  • Previously, cells only contained a single, flat piece of text upon which formatting can be applied. With new AI-powered online data types, a cell could have a region or country value from which more information such as the population, capital city, area and many more details that can be extracted. The first two data types supported are Geography and Stocks, with more promised.

Note that you must have either Excel 2019 or Excel 365 to use these tools listed above. If a model containing any of these new features is opened in a previous version of Excel, in most cases you’ll be able to view the feature, just not make any changes to it. With new functions, however, the formula will simply stop working if opened in a non-compatible version of Excel which will undermine the functionality of the model – unless viewed using Excel Online. So, if you are building models in Excel that other people with prior versions need to use, then you need to consider the version capabilities as you build.

So, in conclusion, there’s no need to wait for Excel 2019 – it’s already here! When the perpetual version of 2019 does become available it’s highly unlikely to contain any ground-breaking new features, as it will be based on the features already available to those with a 365 subscription.

 

 

A Guide to Excel Version Compatibility

Collaboration is an inevitable feature of today’s working environment, and financial modellers are no exception. In the interests of building good working relationships and reliable outcomes when building a financial model, it’s important to cultivate processes that take Excel version compatibility into account.

When you are building financial models or spreadsheets that others will need to use, the sensible starting point is to find out which version of Excel they’re using and check for known incompatibilities. Creating a model containing a TreeMap chart, for example, simply will not show up at all in any version of Excel prior to 2016 except as a white, blank square where the chart should be. Obviously, you’ll save yourself some trouble when building a model if you don’t include features that are not supported in earlier versions of Excel which may be utilised by others. The problem is that we don’t always know which features are included in which version.

The biggest culprits are often new functions. It’s very frustrating to build a model with a TEXTJOIN function, only to discover that the model user sees a #N/A error instead of the function result. I can tell you from personal experience that the alternative to a TEXTJOIN can be a very long CONCATENATE or ampersand (&) solution which is not much fun to build.

Excel Version Compatibility

To help you avoid the pitfalls of mismatching models, I have compiled a list of some of the features that were introduced in various versions over the past decade. It’s impossible to be comprehensive without writing a book on the subject, but what I have come up with is a list of the most notable features introduced in each version. I have placed an asterisk next to those which are not compatible with prior versions and which can cause serious problems and undermine the functionality of the model when opened in a previous version of Excel. These most troublesome features are itemised separately at the end of this article.

Excel 2019/365

The following features are being introduced in Excel 2019 or to those with an Office 365 subscription:

  • Custom visuals to create chart types (previously only available in Power BI)
  • Full support for SVG graphics and 500 built in icons (that can be used creatively to create infographics & charts)
  • The Insights feature for quick analysis of tables
  • 3D Models
  • Custom functions in JavaScript
  • Excel connects to Flow & Forms
  • Online data types (such as stocks & geography)
  • Map & funnel charts
  • Lots of new functions such as IFS, SWITCH, TEXTJOIN, MAXIFS and MINIFS*

Get more detail on each of these features in this article on What’s new in Excel 2019 or see David Benaim’s vimeo channel on 2019 only Excel features.

It’s also worth noting that Power Query’s name had inexplicably been changed to Get & Transform in 2016 but in now reverting to Power Query 2019.  Halleluiah.  Much simpler.

If you’re a Mac user, then this version has finally embraced some advanced Excel features, like Pivot Charts, a customisable quick access toolbar, slicers and Flash Fill. It’s now mostly equivalent (besides the companion products Power Pivot & Power Query)

Excel 2016

A host of new features were introduced in Excel 2016. Here are some of the most useful:

  • The Forecast Sheet uses new functions such as FORECAST.ETS which uses an exponential triple smoothing algorithm*
  • Additional chart types such as Waterfall Charts, Histograms, Pareto, Box Plots (Box & Whisker), TreeMap and Sunburst*
  • Better Analysis in Pivot Tables & Pivot Charts. Pivot tables have automatic grouping and new plus & minus buttons
  • Power Query (Get & Transform) is now on the Data Tab so no need to install it

Excel 2013

There was an extensive features and functions update for Excel 2013:

  • Flash Fill to learn the pattern of the data you’re entering and complete it for you
  • Quick Analysis makes it easy to analyse your data with formatting and charts after highlighting with the mouse
  • Chart Recommendations and Customisations, data labelling using “value from cells” and the way that the chart is built changed. The only notable new chart type was the Combo chart (a chart combining both a line and column chart on two separate axes) which doesn’t cause compatibility issues.
  • PDURATION() returns the number of investment periods required for the invested amount get to the specific value
  • IFNA() allows you to suppress a #N/A error only
  • ISFORMULA() will return the value TRUE if the cell contains a formula
  • FORMULATEXT(), when linked to a cell with a formula it displays that formula. This can be a useful auditing tool.
  • Single window per worksheet allows the same session of Excel to show different files on multiple monitors (my personal favourite)
  • New web-based functions help in building links to web services, reading XML content, and connecting with online content
  • You can create relationships between tables for enhanced data analysis without having to consolidate all the information into a single table and create pivot charts
  • Slicers, previously only available for PivotTables, became available in Excel tables as well*
  • A timeline also became available for PivotTable. Similar to a slicer, the timeline allows filtering by dates.
  • Power Pivot became a built-in feature of Excel 2013

Excel 2010

The following features were introduced in Excel 2010:

  • Power Pivot was first available as an add-in
  • Sparklines*
  • Slicers in PivotTables*
  • The AGGREGATE function
  • An overhaul of Statistical functions

*Not compatible with previous versions

So which features do I need to worry about?

You don’t need to worry about avoiding any of them if everyone who might possibly ever open the model is using the same version of Excel.  If it’s a financial model only used internally and your entire company is on Office 365 then go ahead and IFS or SWITCH to your heart’s content. But if you have cause for concern regarding compatibility then these are the features you need to be aware of, and possibly avoid, depending on the version of Excel each participant is using:

Version Feature
Excel 2019/365 – Custom visuals
– Map charts
– New Functions such as:

  • IFS
  • SWITCH
  • TEXTJOIN
  • MAXIFS
  • MINIFS
Excel 2016 – Forecast Sheet (because of the functions used such as FORECAST.ETS)
– New Chart types such as:

  • Waterfall Charts
  • Histograms
  • Pareto
  • Box & Whisker
  • TreeMap
  • Sunburst
Excel 2013 – Slicers were introduced to tables as well as PivotTables
– New Functions such as:

  • PDURATION()
  • IFNA()
  • ISFORMULA()
Excel 2010 – Slicers for PivotTables
– Sparklines

 

Ideally we’d all be working on the latest version of Excel with all the bells and whistles, but back here in the real world the potential for inadvertent non-compatibility remains an ongoing issue. To expand on the above list, please feel free to add your own personal favourites that you think merit a mention.

On a positive note, as more users move towards Excel 365 subscriptions, compatibility issues will become a thing of the past and personally, I can’t wait.

Griffith University Interview with Danielle Stein Fairhurst

Danielle Stein Fairhurst graduated from Griffith University with a Bachelor of International Business Relations. Since then, she has completed a Diploma of Accounting and Finance from ACCA in London and an MBA at Macquarie University and now runs Plum Solutions, a consultancy specialising in financial modelling and analysis. She is the author of two books and travels regularly to deliver specialised training courses and consulting services. Griffith University visited Danielle at her home in Sydney to find out more about how her first degree contributed to her career path.