Financial Modelling New Year’s Resolutions

The advent of a new year is a great opportunity to put in place some aims and goals. Financial modelling should be no different. Here are some things, which you might want to focus on for your New Year’s Resolutions as a financial modeller.


Keep it simple

Avoid over-engineering, over-complicating your financial model – wherever possible. In most instances, a compact financial model that meets client or management’s specified outcomes for business or investment decision-making will suffice.


Model user guide

Although it may seem a chore and a bore, a user guide or high-level instruction manual (as part of the financial model) will be a welcome addition to model users. The depth of the guide will depend on time constraints, as well as budgeting pressures – if performing a client mandate; but a high-level outline of the model’s inputs, assumptions, mechanics and outputs will deliver insight to model stakeholders.

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Capitalise existing financial models (where possible)

It is always tempting to impose your financial modelling approach with a corporate client or work colleagues; in terms of heralding in a new way or clean slate to a company’s financial models.

However, endeavour to apply existing corporate financial models into any new financial model, because it will save time (and labour costs), uphold existing and familiar financial modelling techniques, and respect the politically sensitive nature of previous model developers’ predecessor financial models.


User defined names and drop-down lists

A key tenet of best practice financial modelling. Avoid the time-consuming and potentially inconsistent naming convention of repeatedly re-keying the names of business units, subsidiary companies or projects across an entire financial model – by creating user defined names in the assumptions or input worksheets of a model.

Incorporating drop-down and dependent drop-down lists will further improve spreadsheet controls. It will restrict model users to input data from the confines of a list of parameters.


Why am I building this financial model?

Before you go off and spend an entire day building a “you beaut” financial model; stop to ask yourself why are you building the model in first place? Is it to assist executives on investment decisions? Improve monthly or annual financial reporting? Model the pricing for a new good or service? Spend some time planning the formation of the financial model.


Make executive dashboard or summaries aesthetically appealing

Beauty is the eye of the beholder. Although the detail of a financial model does not need to be a work of art; attempt to make the executive summaries, graphs and outputs appealing to users, in terms of their visual appeal, uniform corporate colours and financial insight to executives. Often a financial model’s improved marketing appeal will improve stakeholder buy-in and acceptance.

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Write VBA code instead of using macro recorders (if applicable)

Avoid the temptation to use macro recorders to create macros. Instead spend a little more time to write a less memory-intensive, re-usable macro which doesn’t reference absolute cells.


Document all VBA code in Visual Basic Editor (if applicable)

Similar to a model user guide, documenting and commenting on all VBA code written behind a financial model may appear tedious. In the pursuit of building a proprietary, cool piece of VBA code for a customised financial model; make sure to spend a few minutes to adequately annotate all code – in case you or another model developer needs to refer to the code at a later date.

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