Microsoft Office Reference Guide

Mar 26, 2004

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To me, business analysis in Excel has usually meant conditional formatting and pivot tables. But a big buzzword for Excel 2007 has been the concept of "business analysis." In some cases this has meant dashboards, like Xcelsius — but I wanted to learn more about what this actually entails, so I took a look at Business Analysis with Microsoft® Excel®, Third Edition, by Conrad Carlberg (Safari Link).

In many ways this book relates to others that I have reviewed for this site — it takes a popular program and describes its practical application rather than try to merely teach its features.

The only problem here is that this book is highly targeted — you really need to be well versed in financial matters to take advantage of it — but if you are then I suspect this material will greatly stimulate your thinking and increase the breadth of your knowledge of your field.

The book is broken down into four main parts: Analyzing Financial Statements, Financial Planning and Control, Financial Decisions and Sales and Marketing.

In each section Carlberg goes through specific scenarios that involve fictional companies in real life situations.

What makes this book extremely valuable, particularly to an accounting neophyte like me, is the availability of the actual Excel files and worksheets that are illustrated in the examples from the supplemental web site that can be accessed from the publisher.

Taking a look at the formulas in the simple Cash Worksheet in Chapter 2, for example, provides the user with an instant Excel file that replicates the most basic part of the most popular financial program, Quicken.

You could theoretically easily transform this workbook alone into a personal or small business cash summary that might even make Quickbooks superfluous, but don't quote me on that.

Figure 1316

Carlberg also uses case studies that go beyond the figures to make some sense and give meaning to the processes described in the book. In Chapter 6 he describes variance analysis using a mythical tour operator and goes through an in depth analysis of its financial data.

My only problem in following this was that one Excel file was apparently created with a beta 2 version and I could not open it in Excel 2007.

That was a bit of a bummer because I was trying to follow the example. It happened with a number of chapters but I suspect it will be reported in errata and fixed — that's one of the advantages of a web site over a book CD.

Chapter 18 — Importing Business Data into Excel offers some nice examples of using VBA and ADO and connecting data in Excel to an Access database. It's always extremely helpful when working in these areas to be able to see a practical application of these program features and also view the actual underlying code.

Figure 1317

On the whole, however, this is a great way to see practical application for features of Excel that you may have avoided because they seemed impenetrable as abstractions.

This is especially true of arcane functions and VBA code; both of which are handled extensively in the book with specific examples relevant to real world issues.

I think this book would be extremely valuable to an accountant, CPA, financial planner or anyone who runs a financially complex enterprise but has only limited understanding of Excel — and wants a practical way to broaden his or her understanding.

Rather than trying to learn the program itself, someone with specific understanding and needs in these areas can concentrate on following the specific examples, and thereby master both the procedure and the way it is handled by a spreadsheet program, in this case Excel.

A quick look at the book description provides an excellent overview of the many tasks that can be accomplished with business analysis:

What’s the relationship between my cost of goods sold and my inventory?
How do I get Excel to keep these values up-to-date on my income statement and my balance sheet?
I have to track service quality over time. How can I automate that using Excel charts?
How can I forecast future demand for my products, based on prior sales results?
What’s the difference between financial leverage and operating leverage? How do I calculate them using my financial records?
I need to project my financials for next year. Does Excel have a tool for that? What do I need to know to use it effectively?
How do I do all these things using the new Ribbon in Excel 2007?
What are the best ways to automate a connection between Excel and an external database?
Sample journals and ledgers; examples of trial balances, income statements, and balance sheets
Custom functions, such as FIFO and LIFO, for inventory management
VBA routines that automate the creation of forecasts, quality control charts, and sales and marketing analysis
Statistical process control charts: P charts, X-and-S charts, X-and-MR charts
Forecasting tools: Seasonal smoothing and ARIMA model identification

If one or more of these processes would be helpful to you in your business or career, then taking advantage of a powerful tool like Excel to accomplish this task would be of obvious benefit.

Despite the problems with some of the sample files, following along with Carlberg's descriptions and analysis can help you master these same techniques and also broaden your understanding and appreciation for Excel.

Another book you might consider but which I have not personally looked at is Microsoft® Excel Data Analysis and Business Modeling by Wayne L. Winston (Safari Link).

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