Financial Modeler's Corner

AI vs. Human Insights in Financial Modeling to Build Accurate Models for Decision-Making

Jan 7, 2025

Will Wardle, a seasoned financial modeler, Carolina Lago, an expert in financial restructuring, and Rishi Sapra, a Power BI advocate, engage in a dynamic discussion on the future of financial modeling. They tackle the ongoing relevance of Excel and debate the impact of AI on creativity versus efficiency in modeling. The conversation also highlights the merits of Power BI for enhanced data visualization and storytelling. Packed with insights, this dialogue reveals the critical skills necessary for modern financial modelers in a rapidly evolving landscape.

01:01:53

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Episode guests

Rishi Sapra

Carolina Lago

Will Wardle

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Episode notes

Podcast summary created with Snipd AI

Quick takeaways

Circular references in financial models can hinder performance and lead to inefficiencies, necessitating innovative solutions like VBA for better management.

Dynamic arrays introduced in Excel can enhance model responsiveness and simplification, yet they may also complicate auditing and compatibility with older versions.

Despite the emergence of AI and Power BI, Excel remains a critical and enduring tool in financial modeling due to its deep-rooted functionalities.

Deep dives

Challenges with Circular References

Circular references in financial models often lead to instability and inefficiencies, making them difficult to manage, especially in project finance. The iterative processes caused by circular references slow down model performance and complicate the overall design. Many practitioners argue that relying on methods such as copy and paste simply masks the underlying problems of these references rather than solving them. Innovative solutions, such as leveraging VBA to create user-defined functions, have been proposed as a way to effectively address the challenges posed by circular references.

Intro

3min

Navigating Financial Modeling Challenges

26min

The Debate on the Importance of Three-Statement Models in Finance

4min

Debating AI and Power BI in Financial Modeling

15min

Balancing Perspectives: Cash Flow vs. Balance Sheets

8min

A Kaleidoscope of Career Insights: Excel and Financial Modeling Fun

5min

In the second part of "The Great Debate," expert financial modelers from around the globe discuss controversial and thought-provoking questions about the art and science of financial modeling. The discussion focuses on the enduring relevance of Excel, the role of AI and Power BI in shaping the future of modeling. This episode highlights the nuances, complexities, and future of financial modeling as a discipline.

This episode features Giles Male, co-founder of Full Stack Modeler and an Excel MVP, Will Wardle, an independent financial modeler with over two decades of experience, Carolina Lago, founder of Classic Financial, specializing in FP&A and financial restructuring for SMEs, Hedieh Kianyfard, a project finance expert from Iran, known for her practical solutions to complex modeling challenges, Oz du Soleil, a YouTube star and Excel MVP, renowned for his engaging tutorials and insights, Rishi Sapra, a former accountant turned Power BI advocate, and David Brown, a seasoned financial modeler with 27 years of experience, excelling in blending Excel with Power BI.

Expect to Learn:

The role of circular references in financial models.
Why named ranges in Excel can either simplify or complicate financial models.
The impact of AI on the future of financial modeling.
How Power BI complements financial modeling by enhancing data visualization and storytelling.
The debate on the most important financial statement and how it informs decision-making.

Here are a few quotes from the episode:

"Dynamic arrays offer huge improvements, and we should aspire to use them more effectively as a community." - Giles Male
"A three-statement model is the universal language of finance, connecting operations and strategy for decision-making." - Carolina Lago
"Power BI complements financial models by adding context, automation, and storytelling, making it a must-learn tool." - Rishi Sapra

This episode of The Great Debate offers a lively exploration of financial modeling. The expert panelists highlight how financial modeling combines art and science, requiring technical mastery, critical thinking, and creativity. The discussions underscored the importance of balancing simplicity with complexity, leveraging technology without losing sight of foundational principles.

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