What to look for in a Financial Modeller

When you decide your company’s financial models are not as good as they should be, is the first thing you do; send your staff on an Advanced Excel course?  Whilst this is helpful, there’s an awful lot more to Financial Modelling though than being good at Excel!

Do you need an Excel Jockey, a Finance Wizard, or a Financial Modeller?


Six reasons your spreadsheet is NOT a financial model

I’ve often been asked the difference between a spreadsheet and a financial model, and there is a fine line of definition between the two. In a nutshell, an Excel spreadsheet is simply the medium that we can use to create a financial model. (Of course there are other programs besides Excel that can be used for modelling, but that’s another story!)


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.

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.

Should you Upgrade to Excel 2007?

The upgrade from Excel 2003 to Excel 2007 is probably one of the most significant changes for Excel users yet.  There are many new functions, most of which are an improvement to 2003 but they do take some getting used to!  As a financial modelling consultant and trainer, I’m often asked by my clients what are the advantages and disadvantage of upgrading to Excel 2007 and whether organisations should even bother.


Five Excel Formulas to make you cringe

When creating a financial model, there are always multiple ways to write a formula which will all give you the same result.  The key is to write formulas intelligently so they are easily deciphered by yourself at a later date, or by another party reviewing your model.  As well, writing a formula one way may cause problems for your model at a future date when you start inserting rows and columns, and expecting the new data to automatically be included in calculations.

Don’t get branded as a novice

As a financial modeller and trainer, I’ve seen formulas bad enough to make the even the most seasoned modeller shudder.  Below is a sample of the sorts of formulas that if used in your models will brand you as an inexperienced or novice Excel user.

  1.  Ongoing addition of multiple cells such as =A1+B1+C1+D1+E1 instead of the sum function: =sum(A1:E1).  Time consuming and prone to error.  Need I say more?
  2. Nesting a fixed number, such as a percentage:  =.75*A1 where .75 may be cost of goods sold.  Instead, use an assumption cell where the .75 can be changed easily.  This is going back to the golden rule of never entering hard-coded numbers into formulas.
  3.  Creating an average by adding all the cells and dividing by a set number.   E.g. =(A1+B1+C1+D1)/4 instead of =Average(A1:D1).
  4. Unnecessarily long formulas.  As far as I am concerned, the new resizable formula bar is a completely redundant feature of Excel 2007.  Your formulas should never be that long!  They should be broken down into logical steps.
  5. Excessive use of the IF formula.  You can have up to seven nested IF statements within one formula but that does not mean you should!


As simple as possible and complex as necessary

Most of these are examples of inefficient use of Excel where a more sophisticated function is available.  However, there is absolutely no point in using a fancy function just for the sake of it.  “As simple as possible and as complex as necessary” is a good rule to follow when it comes to formulas and modelling.  Remember when building your financial model you want to make your formulas as transparent and easy to follow as you can.  You also want to give the user as much flexibility and power as possible while avoiding confusion or potential for error down the road.

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?