Strategic financial modeling is the foundation of effective enterprise performance management. Organizations need to become more agile through better analysis and modeling capabilities. To navigate today’s economic landscape, they need to find efficiencies such as eliminating spreadsheets and manual processes.
Two out of three Chief Financial Officers (CFOs) say their organizations do not yet have the capabilities for agile decision making, scenario planning, or decentralized decision making that will be required to remain competitive in the coming years (McKinsey & Company, December 2016).
With the American Health Care Act (AHCA) recently passed by the House of Representatives, another step is forthcoming. The Senate has been working on its own bill and one must wonder how this is all going to evolve. Whatever the final version of the AHCA is going to look like, one thing is certain – healthcare is going to be in flux. Financial modeling can be a great resource for hospital and health system executives in situations like this.
So, what is financial modeling? And how can it help organizations?
- Financial modeling is the construction of representations that illustrate an organization’s likely financial results in quantitative terms
- Financial models can simulate the effect of specific variables so that an organization can plan a course of action should they occur
- A financial model tries to capture all the variables and subsequently quantifies the variables and creates formulas around these variables
- The model provides executives with a mathematical depiction of specific business scenarios
- Often, the primary software tool used to do this is the spreadsheet; however, there are better solutions
The problem with using spreadsheets to create and maintain critical financial data is that it can be quite costly in terms of resources and risk. Passing on documents via email and manual adaptation are incredibly time-consuming; distributing confidential financial information through email poses serious security risks. In addition, spreadsheets are notoriously error-prone; close to 90% of spreadsheets contain errors (Dow Jones & Co’s MarketWatch).
So, what’s the solution? You may have heard of Questica Budget – it’s a web-based budgeting tool that was purposely developed for the public sector. It provides a controlled environment for budget input, review, approval and maintenance. Questica Budget offers one point of data entry and seamless integration with an organization’s financial system. Through the budgeting platform, organizations can gain granular insights by streamlining data from multiple sources and eliminate inefficient spreadsheets. Running different “what-if” scenarios to create multiple financial models is straightforward, and the impact of each scenario is immediately understood.
Questica’s budget solutions manage $55 billion in annual budgets and been implemented by over 200 public sector customers including hospitals and other healthcare organizations.
If you would like to provide your health system with predictive insight to make decisions about strategic next steps and investments needed to transform your organization, try a demo of Questica Budget today.