Statista reports that the global industrial automation market will reach $265 billion by 2025. That’s not surprising, considering that the world has recently seen an explosion of new software products.

Innovations in financial modeling software allow companies to understand their financials better and make informed decisions. With automation, companies can quickly analyze large amounts of data with greater accuracy than ever before.

So what’s new in financial modeling software? Let’s learn more about it.

New Trends in Financial Modeling Software Industry

The financial modeling software industry is constantly evolving with new and improved features. Here are some of the key trends that you should know about:

AI-Driven Forecasting

Many financial modeling software products now use Artificial Intelligence (AI) to automate financial forecasting. AI-driven forecasts can be much more accurate than manual ones and can save businesses time and money.

AI-driven forecasting is also becoming increasingly important in the context of customer segmentation, data visualization, risk management, and portfolio optimization.

For instance, IBM Cognos is a solution for automated forecasting that uses AI for data preparation. The software also offers automated data exploration and prep.

Cloud-Based Financial Modeling

Cloud-based financial modeling is becoming increasingly popular as it allows users to access their financial models from anywhere in the world.

It also offers scalability and cost savings, as it does not require users to install software on their own machines. Additionally, cloud-based financial modeling enables easy collaboration between teams and stakeholders, as data can be shared in real-time.

Besides, these modeling solutions are typically integrated with third-party applications and services, allowing users to access external data sources easily. Quantrix is such a modeling platform that provides a cloud modeling system. Since it facilitates integration with other platforms, users can get the most out of this solution.

Automated Reporting

Automated reporting is another trend to appear in the financial modeling industry. It allows users to generate reports from their financial models quickly. It also saves time and eliminates the need for manual report generation.

Automated reporting solutions also enable users to access historical data, which can be used for making more informed decisions. In addition, these solutions provide the ability to track changes in the financial model over time.

Suppose you want to generate organized financial statements from your models. You can use financial modeling software like Oracle BI, which has ad-hoc reporting with profit and predictive analysis.

Machine Learning

Whether it’s risk management or predictive analytics, machine learning is becoming a vital tool in financial modeling solutions. Machine learning algorithms are used to analyze large volumes of data, identify patterns and trends, and provide insights that can be used for decision-making.

For instance, IBM Watson is a solution that leverages machine learning algorithms to provide insights from financial models. It can identify risks, analyze customer segmentation data, and more.

Financial Modeling Software vs. Excel Financial Modeling

Even in the presence of financial modeling software, Excel is still dominant in the financial modeling process. Evidently, the traditional approach still has some advantages over the automated approach. Here’s how both these options compare.

Customization

Excel is manual-based, which means a financial modeler can customize every aspect of the model by manually inputting and validating data as well as creating formulas. On the other hand, financial modeling software usually has a set of pre-defined templates and formulas, which can make it challenging to modify.

With Excel, you can start from scratch and take complete control over the data and formulas that go into your model. Likewise, you can enjoy full freedom in the format and presentation of the output.

While financial modeling software allow some degree of customization, they can still be limiting. First, they often require you to use their formulas, which may not be suitable for every situation. Second, the output formats are usually pre-defined and cannot be changed.

Speed

Financial modeling software simplifies and accelerates the financial modeling process by having pre-defined templates and formulas that can do complex calculations with a few clicks of the mouse.

Meanwhile, Excel requires manual input and formulas that can take much longer to enter and calculate. Thus, if time is a priority, financial modeling software is the way to go.

Errors

Since Excel is manual, it’s possible for errors to slip in due to human error. On the other hand, financial modeling software makes use of predefined formulas, which can reduce the risk of errors.

However, the accuracy of your model is still dependent on the data and assumptions you enter into the system. Thus, you should always double-check your inputs and outputs regardless of what approach you use.

Visual Representation

Excel might allow graphical representations of your data, but financial modeling software can provide more comprehensive visualizations. Modern tools can generate charts, graphs, and tables to give you a clearer and more comprehensive understanding of your model.

Cost

Financial modeling software are usually expensive and require an upfront cost to purchase. But Excel is almost free, and you can start building your financial model right away.

If you are just getting started in financial modeling and don’t have the funds to invest in software, Excel is the way to go. It’s also great for startups and small businesses that don’t need the power and features of financial modeling software.

Automation Is Not Always the Answer

There’s no denying that the financial modeling industry has been revolutionized by the rise of automation. But, Excel still has its place in the financial modeling process.

But then again, the high risk of error and lack of expertise can make it difficult for startup founders to make the most of Excel modeling. That’s where Numberly’s expertise comes in.

At Numberly, we create financial models for startups. Our experienced team of financial modelers leverages the best of Excel to create custom models tailored to the specific needs of our clients. We understand the nuances of financial modeling for startups and create models that you cannot only understand but also use for decision-making and growth strategies.

If you need help with financial modeling for your startup, schedule a 30-minute call with us today.