Can financial modeling be automated?

Financial modeling is part art and part science. So can it be automated? Gradually, yes, and Fluxo is on the task.

Automation is not a binary thing. Think about autonomous vehicles, for example, there are 5 levels of autonomy:

A similar thought process can be applied to Financial Modeling, with Level 0 being a manual spreadsheet and level 5 being “Alexa, please forecast the three most likely scenarios for my financial statements for the next 3 years”.

Level 5 may never be possible for financial modeling, because there are so many nuances and cognitive exercises that go into building a financial model. It has to be tightly coupled with the company strategy, so you can probably only fully automate financial modeling if you also automate strategy. Can future technology build an artificial CEO?

The question then is what is in between level 0 and level 5, what can we automate?

  1. Data input: The first level of automation in financial modeling allows you to not have to copy and paste numbers from your accounting software, or from your sql queries. It integrates with your data sources so your model can be updated automatically.
  2. Formulas: The second level of automation is a simplification of formulas. Why type “=E5*(1+5%)^(1/12)” when you can just type “grow 5% per year”? The same applies for hiring schedules, debt schedules, and so many other cases.
  3. Reports: The third level is avoiding the need to creating charts and tables, formatting them, pasting into a ppt or doc. Imagine your financial model having an automated output that is shareable and you can use to present to any stakeholders.
  4. Scenarios & sensitivity analysis: Probably the hardest one to automate, level 4 is having the ability to automatically derive scenarios and sensitivity analysis that makes sense based on your models, including logical relationships between different external and internal triggers.

Ready to automate your financial model? Signup now for Fluxo!