Develop financial model for your organization to stay ahead of competition

Posted by juanoliv3 on December 21st, 2015

Business houses are seeking commercial and financial services from professionals and experts in order to ascertain that they are staying on the right track. To develop financial model that will guide the company towards the right direction, what companies require is people with experience and skills to give them the correct predictions. A financial model is a representation of the real-world financial situation. This is usually done to assess the performance of a business asset or a project or the entire business. Clients look for reassurances that their investments are in safe hands and financial modelling is just one of the tools that would help them analyse the risks.

What is a financial model?

Let’s make this simple. You are about to begin a new project or you want to measure the performance of a financial asset. What do you do? You create a hypothetical situation where you place that project or asset in a similar representation of a real-world financial situation and then create a mathematical model to judge its performance. You create a financial model of the project and present it for the purpose of corporate financing. Your potential investors get a financial prediction. Another benefit of such a task is that you get a predictive analysis with respect to asset pricing. It is usually done on a spreadsheet where a software is used to derive the results.

How to develop financial model and its significance

The main function of the model is to give numeric values to theoretical hypothesis in asset pricing or corporate financing. When you need to convince your potential investors or customers of the viability of a project or a financial asset, you need to develop financial model in order to consolidate your arguments. There are a number of applications of financial modelling such as scenario planning, project finance, capital budgeting, business valuation, financial statement analysis and decision making process. If you have a possible financial evaluation in mind, it becomes easier for you to make decisions or present a convincing picture to your financers.

There are a number of intricacies that need to be looked at and compliance issues that can’t be overlooked either. Hence enterprises are outsourcing their commercial and financial wing to external service providers. Unlike investment banks they do not charge a hefty amount. They work on a contractual basis and have their fees fixed for their services. This is why such service providers are emerging as popular choices for the big industrial houses. Spreadsheets and software are used to derive a financial model on the basis of the assumptions and numbers. To develop financial model that holds strong professionals require years of experience and expertise; otherwise it becomes hours of calculative analysis without any results. You can get financial modelling done at a competitive price if you decide to hire an independent consultant rather than an investment bank.

Business sectors that would gain from using a financial model can include both private and government organizations. They can be a part of infrastructure, resources, property or industrial establishments. The requirement to develop financial model cannot be ignored in the current business and financial scenario.

You can hire a financial services consultant to develop financial model as a financial model is what would support your arguments in front of your potential investors.

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Joined: March 3rd, 2015
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