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Interactive Data in Financial Modeling

Embracing interactive data in your financial modeling

Not everyone will understand how to interpret financial data, but they still might have questions that are impacted by financial performance.

For example, Sales teams may be given a revenue goal, but tracking revenue in a static financial report is not exactly the most intuitive way to understand changes over time. This is where interactive financial data comes in. Interactive financial data platforms enable real-time models that can be collaborated on across teams, ensuring the whole company is involved in tracking and analyzing important trends.

What is interactive financial data?

Interactive data refers to using software that enables data manipulation modify elements, usually on a visual representation such as a graph. It is essentially technologically-enhanced financial modeling. Most businesses employ technologies that allow financial advisors and analysts to quickly and easily change the parameters of data visualization, allowing them to see more detail, produce fresh insights, generate interesting questions, and fully understand the data.

By the way, as a data platform focusing on interactive data, you can jump right into Causal for free to see how data visualization and playing with numbers works.

Static vs interactive financial data

As the names imply, static data is not manipulated once distributed, whereas interactive data can be updated on an ongoing basis. An example of static data might be a line chart showing how the cost of goods sold (COGS) has changed throughout the course of the year that is distributed as a PDF via email. Interactive financial data, however, exists in a living database that can be changed as the company changes. The visualizations will change accordingly as elements of the business change in real-time.

Benefits of Interactive Financial Data

Interactive data is more engaging and dynamic. It enables more visibility for teams across the company and facilitates collaboration across teams. Interactive data tools surpass the capabilities of static spreadsheets. Interactive platforms allow you to find, isolate, and visualize information across time. They are ideal for interpreting large amounts of data with complex relationships that cannot be easily displayed with traditional spreadsheet tools.

Visual elements make it easier to quickly identify and understand trends. This can make a major difference for businesses, as insights can be uncovered before problems arise. Each department can analyze its own information on its own terms. When data is easier to understand, action can be taken sooner. Companies can understand how day-to-day activities impact the bottom line in an instantly digestible visual format.

One of the challenges financial advisors often face is trying to explain important financial trends or concepts to less financially-minded individuals, such as executives. Interactive financial data makes it easier for everyone to understand concepts because any concept can be instantly made into a visual, whether it be a line graph, pie chart, or other visual aid. This makes it much easier to explain key objectives to less numerically inclined peers.

Interactive data makes it easier to collaborate across teams, regardless of the financial savviness. Additionally, anyone can check in on interactive data by viewing the visual aids as needed. Unlike static financial data, interactive data is designed for teamwork. This makes it particularly beneficial for large companies where departments may have competing needs that become difficult for one finance team to keep up with.

The truth is, most employees are unlikely to dig through long documents with financial updates to find the information that is relevant to them. Interactive data is more engaging and exciting, which means it encourages effort from all vested parties.

Leveraging interactive financial data

When determining which interactive financial data models to build, it’s important to consider several elements first. Consider a few questions:

  • What model would be most helpful to your business?
  • Do you have enough data to create a meaningful model?
  • Will it be maintainable?

Data needs to be easily understood and interpreted by many people across the company with different levels of financial education. Avoid sharing models that will only add confusion.

Next, you’ll need to understand you are meticulously tracking any data that is relevant to the models. While interactive financial data is beneficial in that the visual aids are usually automatically generated, data collection and input are still somewhat manual. How manual it is may depend on the tool you’re using. Keep in mind that with modern data tools you can completely bypass this. A platform like Causal plugs right into your data sources, making data aggregation a snap.

Be open to input from others in the organization that needs to leverage the models. Don’t take feedback as criticism, but understand that not everyone understands financial models as well as the finance department. If you are taking data input from various departments, you’ll also need to ensure that they are collecting data accurately and reliably. This may involve some training, which is also an excellent opportunity to aid them in delivering information in your preferred format.

Overall, implementing an interactive financial data model is not a “one and done” project. It will require constant monitoring and multiple iterations. It’s helpful to limit how many people have access to the models and what kind of access they have. For example, everyone may not need the ability to edit data. In fact, that capability should probably be limited to only a few trusted individuals to avoid corrupting data.

Fun with numbers

Interactive data makes it easier to collaborate across teams in real-time and work closely with those who may not have a degree in finance. It can be used to create dynamic models that are superior to static spreadsheets.

Remember that maintenance will likely be on the finance department and it will be up to them to keep data clean. The better the tools, the easier data management becomes. When a high-quality platform like Causal is used, interactive data is one excellent way for companies to operate more efficiently and effectively.

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