Most growing businesses build a financial model at some point – usually for funding, forecasting, or reassurance. But as, Powdr founder, Joe van Gelder explains in our latest video, the number one modelling issue we see is simple: businesses build a financial model and then stop using it.
Joe has seen this pattern from every angle. He’s worked as a banker, lender, adviser, operator, and founder. In 2022, he co-founded Powdr, a tech-enabled strategic finance platform built to give small businesses access to the tools and insight typically reserved for much larger companies.
This article breaks down why so many businesses build a financial model and stop using it and what needs to change if your model is going to support real decisions, month after month.
Most businesses build a financial model for funding, not operations
Most business owners build a financial model because a bank or adviser asks for one. It’s created to support a funding decision, not day-to-day management.
The British Business Bank confirms that lenders require forward-looking forecasts and cash flow projections when assessing SME finance applications. But ongoing use of those forecasts inside the business is far less common.
Once the funding conversation ends, the reason to build a financial model disappears. That’s why so many models quietly get shelved.
The biggest mistake: building a financial model and never revisiting it
As Joe explains, the problem is rarely that a financial model is wrong when it’s first built.
The problem is that once businesses build a financial model, it’s treated as a finished document, not a living tool.
In growing businesses, assumptions change constantly. Costs rise gradually, hiring takes longer than planned, customers pay later, and revenue timing shifts.
Research from McKinsey shows that organisations relying on static forecasts struggle to respond to change, while those that regularly update forecasts make faster, higher-quality decisions.
When business owners build a financial model but don’t revisit it, the model quickly stops matching reality. What once felt useful starts to feel unreliable.
Outdated forecasting and weak financial control are early warning signs in businesses. These issues don’t appear overnight they build gradually when assumptions aren’t reviewed.
Once the numbers no longer reflect what’s actually happening in the business, trust disappears.
And when business owners stop using the model they built, it no longer supports decisions around hiring, pricing, or cash planning.
Excel makes building a financial model harder than business owners expect
Most businesses build a financial model in Excel because it feels familiar, flexible, and quick to start. In the early days, that flexibility feels like an advantage.
As the business grows, flexibility becomes fragility. Every update relies on manual inputs, hidden formulas, and careful version control that’s easy to lose under pressure.
Spreadsheet models are especially vulnerable to small changes. A single overwritten formula, broken link, or copied tab can introduce errors that are hard to spot but materially change the output.
Independent research from the European Spreadsheet Risks Interest Group (EuSpRIG) shows that spreadsheet error rates increase significantly as models become more complex and frequently updated. The more a business relies on Excel for ongoing modelling, the higher the risk.
That’s why Powdr replaces excel spreadsheets with software driven models. By automating calculations, enforcing structure, and removing fragile formulas, Powdr makes it easier to build a financial model that stays accurate, usable, and trusted as the business grows.
Instead of spending time fixing errors, business owners can focus on decisions such as hiring, pricing, and cash, knowing the numbers will hold up.
Models fail when they explain history instead of decisions
Many business owners build a financial model to show how the business has performed so far. Revenue, costs, and growth to date are all clearly laid out.
But the people who rely on your numbers such as;
- Banks
- Lenders
- Investors
- Sometimes your own board
Are far more interested in what happens next. They want to see how the business holds up if things don’t go to plan.
Guidance from UK Finance shows that banks look at downside scenarios, cash headroom, and affordability under stress. That means testing delays in customer payments, slower sales, or higher costs not just a best-case forecast.
If you build a financial model that can’t show the impact of those changes, it won’t support real decisions. And when pressure increases, it won’t be trusted to guide the business.
Regular review is what keeps models alive
The difference between a model that gets used and one that doesn’t is how often it’s reviewed. When business owners build a financial model and revisit it monthly, assumptions stay aligned with reality.
For example, a business owner might build a financial model at the start of the year assuming two hires by March and customer payments within 30 days. In practice, hiring slips to June and customers start paying closer to 45 days.
If the model isn’t reviewed, cash still looks fine on paper. But three or four months later, the numbers no longer reflect what’s actually happening in the business.
This is Joe’s biggest piece of advice when reviewing models. If you don’t look at your model regularly, it will drift and once it drifts, you stop trusting it.
At that point, the model stops supporting decisions around hiring, pricing, or cash.
Not because it was built badly, but because it wasn’t kept up to date.