Are there irregularities with you Company’s contract price model?
There are a number of basic and straight-forward steps that can be implemented at the commencement of a contract model build, which will help alleviate and avoid painful and time consuming errors or oversights. Often it is a matter of experience and good planning that assists a model builder to avoid such issues.
Contract model build guidelines for success
Firstly, you need to establish some milestones with the contract model build; if you do not have a timeframe then relevant stakeholders won’t have a sense of the urgency for your data input needs.
At the commencement it is paramount to engage all necessary stakeholders in your organisation, such as accounting, operations, procurement and human resources. They will all provide value-adding information that assist in modelling a contract for your Company. Hence you must save all emails and other correspondence, which validates source information and file attachments.
The contract model will be an iterative process, as it will involve multiple stakeholders in your Company; hence it is crucial to archive the model at least daily. That way, if anything goes wrong with the “live” model, one can easily refer back to a recently saved version of the model.
Excel-related modelling tips to uphold
There needs to be robust model version controls in place; it is vital to maintain clear communication with all developers of the contract. It is best to restrict full model access to one or two people. The model should never source information from an email attached file; always save the file (received via email) to an applicable hard-drive. If you source data from an email attachment there is a strong risk of file corruption, and also there is a lack of auditability with sourcing data from a temporary internet file. Instead locate external file information in a model import worksheet. Thus if there is a revision to a source file and assuming the file format remains constant, you should be able to update the source data links seamlessly.
There must be a structure to your model with sections for assumptions, file imports, calculations/outputs and checks. As the following demonstrates, a disciplined model structure greatly enhances your model’s usability.
All external information sources must be placed in model import sheets, and not littered randomly across the entire model workbook. This will greatly improve the auditability and robustness of the contract model. During the contract model build, you must always remedy any model errors or alerts; never ignore such errors as the ability to correct such errors at a later date will be exponentially harder and more time consuming.
Finally, you as the model developer cannot expect to remain in your current position for the rest of your life. Hence it wise to incorporate the simple, but high-level procedures manual inside the contract model, which will help to explain and educate all stakeholders about the mechanics of your model.
Ironing out irregularities will enhance the contract price model’s added value to your Company
There are many simple procedures and disciplines that your Company can undertake to alleviate irregularities tainting your contract price model. If you uphold a disciplined approach to the model’s structure and usability, work in progress errors, interacting with relevant stakeholders, and a robust attention to detail with the model; your Company will avoid the above mentioned irregularities with its contract price model.