SPECIALISTS IN FINANCIAL MODELLING

Which Version of Excel are you Using? Poll Results 2012

Now that Excel 2013 preview is available, I thought it was time to do another poll to see what version of Excel business users are on now.  It’s been around 18 months since the last poll on Excel Version Usage, and I was interested to see if there had been more of a shift towards the new versions of Excel.

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Are you a Generalist or a Specialist Financial Modeller?

One of the fantastic things about financial modelling is that it is applicable across so many different industries.  Good financial modelling skills will always stand you in good stead no matter which industry or country you are working in!  A financial modelling consultant or generalist will prob
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How Long Does it Take to Build a Financial Model?

Whether you are a consultant building a model for a client, or an internal modeller, you or the person who has commissioned the model build will – understandably – want to know how long it will take. The answer is never straight-forward, as like many other tasks it really depends on how long you have got (and there’s never enough time!) and how much detail you need to go into.  The more time you’ve got, the better the model will be! Some models could take months and months of dedicated work, or you could throw together a very high level model in a day or two.

In a high level model, the assumptions would probably only estimates, as you won’t have had time to validate them with stakeholders, and the calculations will be pretty rough. You also might not have much in the way of fancy colours, formatting, drop-down boxes or tick boxes etc, but the numbers should still be reasonably accurate.

Building a Model Under Pressure

It’s a critical point to remember that even when under immense time pressure, the modeller should never compromise on good working practices. Even in a high level model, best practice should still be followed, correct labeling and documentation of assumptions should be maintained. See Best Practice in Financial Modelling for some guidelines on good practice. If these points have been adhered to, there should be surprisingly little difference in the base numerical outcome between a high-level model that takes a few days, and a detailed model which could take months. If pressed for time, cosmetic features such as those shown below can be omitted.

Time permitting, the detailed model may show:

  1. Detailed assumptions documentation, validated by key project stakeholders
  2. Scenarios and sensitivity analysis, using drop-down boxes, tick boxes or data tables
  3. Table of contents or navigation tools
  4. Colours and formatting, conditional formatting, insertion of company logos
  5. Output summary and detailed analysis of output

Time should be spent on “quick wins” – use your judgement to spend your time on calculations that are material to the model. Don’t waste time on validating minor assumptions which are not material to the outcome of the model.

This article is an extract from the book “Using Excel for Business Analysis” by Danielle Stein Fairhurst

Why your Business DOESN’T need a Budget

OK, you’ve taken the plunge – gone out on your own – told the boss to stick it and set up your own business.    You’ve left the corporate world behind and you’ll be playing by your own rules from now on!  No more management hierarchies, no boring meetings, no budgets and no getting sign-off to spend any money.  From now on, you’re your own boss and no one can tell you what to do.
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How to Stress-test Your Business Case

In a volatile economic environment, creating a business case for a new project or product which contains financial projections is an extremely difficult task.  Looking at historical data and extrapolating the numbers to create future projections simply doesn’t cut it anymore.
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Should we use Array Formulas in everyday models?

The array formula is probably one of the most powerful tools in Excel – but also the most under-used.  For some reason it is a tool that is shunned by many – even advanced users – of Excel.  But just because most people don’t know how to use them, does that mean they should be avoided in a financial model?

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