If your sales exceed $5 million, you should seriously consider implementing financial modeling as an integral part of your business planning processes.

Almost all businesses prepare budgets at least annually. Your strategic financial model should be considered an extension of the budgeting process.

Large public companies engage in financial budgeting and modeling. It is the only way to maintain control over businesses with thousands of employees, hundreds of departments and/ or subsidiaries and hundreds of millions of dollars in sales. These companies spend hundreds of thousands (if not millions) of dollars a year maintaining their strategic financial plans. But smaller companies, and even start-ups which must finance rapid growth, will also benefit from maintaining a financial model.

Financial modeling is the only way to deal with the multiple events that may affect your company.  Head counts and personnel costs, sales forecasts, product costs, operating expenses,  product development, availability of financing (both equity and debt), capital budgets (including facility requirements), mergers and acquisitions, timing of collections and payments, and competitive pressures must all be considered in the decision making process.

Financial modeling helps document and measure the possible outcomes of various courses of action.  Simply put, it helps you make better decisions.