Financial modeling

The topics in this section relate to the underlying concepts that go into creating and maintaining a model.

All models include financially-oriented design elements. For example, accounts in a model can each have their own calculation method. These are easily defined without needing to learn a programming language. All the structural elements of a model are managed within FP&A Plus including dimension structures, account definitions, automatic movement of data between models, and the relationships between data versions such as actual data and planning data.

A financial model naturally includes data from the General Ledger and can also include data that is imported from subsidiary ledgers such as Accounts Payable and Accounts Receivable. You can also include non-financial data, such as headcount or units sold, as well as key metrics used to measure the overall performance of the business.

This flexibility allows you to design models that consist of multiple models for various purposes and different calculation rules. For example, the equation can be calculated automatically for hundreds or even thousands of entities such as products or business units. This results in a business model that does much more than simply add up data in accounts and cost centers.

The Calculation Rule Sets allow you to have different calculations for different versions of your data. For example, the annual budget exercise may involve simply aggregating data, whereas a five-year plan may require more complex calculations that are based on the metrics that drive your business.

Models

A model represents a business model and is used for analysis, budgeting, planning, and reporting—in short, for understanding the organization's financial operations. For example, a company that produces consumer packaged goods might have one model for budgeting at the detailed product/customer level and another model for budgeting high-level revenues and expenses at the business unit or cost center level. Some companies might choose to have different models for different business divisions or locations.

A model and its data can be thought of as a spreadsheet, but one that can have many more than just two dimensions or axes. For example, where a typical spreadsheet might have two axes, such as Time and Account, a model can contain the axes Time, Cost Center, and Account.

It is important to remember that an FP&A Plus model can have an unlimited number of dimensions. For example, a company might want to analyze some financial data by product, time period, city, type of revenue and cost, and actual and budget data comparison. All these additional methods of analyzing the data are also dimensions, and can exist simultaneously in the same model.

The four dimensions that are present in all models are Time, Time Perspective, Version, and Account. Other dimensions, such as Organization, Project, and Product, vary from model to model, as they are user-defined.

A model interfaces with other financial systems such as the general ledger or a sales order system. Typically, models receive historical data from other systems and allow third-party access to forecast data. They also interface with other models. For example, summarized data from a revenue model can be read into an expense model to calculate a full income statement.

Model types

Model types are ready-made frameworks tailored to specific use cases. Using model types, you can build sophisticated models faster and smarter. In the New Model Wizard, when you choose a model type (Standard, Advanced, or Exchange Rate) core dimensions are automatically defined and features are enabled that are optimized for that scenario.

Some of the benefits provided by model types are as follows:

  • Speed and consistency: Get up and running in minutes with intelligent, use-case-driven structure.
  • Scalable complexity: Handle granular/personnel planning or broad financial scenarios with ease.
  • Seamless integration: Transfer detailed plan output directly into financial consolidation workflows.
  • Optimized performance: Built-in dimension structures support efficient calculation and query performance.

 Note:  A model type also defines the entitlement permissions for a model. That is, by agreement with Prophix, your organization is entitled to specified number of models of each type. You can review your current model types at any time.