Spreadsheet Best Practice

Separation- Dealing with the Calculations of a Financial Model

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The crux of most financial models is the calculations. If your calculations are correct, robust and flexible the reports should easily fall into place. With this in mind some tips and tricks with regards calculations of a financial model:

  • Make steps as explicit as possible- use as many rows/ columns as you feel you need
  • Try and work from top to bottom and left to right. There should be a logical flow to your calculations
  • Build using Buckets. We cover this in much more detail later but this could be the solution to your most complex model problems. The video below gives a quick overview of what we mean.

To follow along go to 1.18 and 1.19

  •  Clearly state all assumptions and identify variables. In some cases this will be covered in the Inputs section but even calculations sometimes require an assumption.
  • NO HARDCODING. Avoid quick fixes in your formula. You will regret them later.

To follow along go to 1.14, 1.15, 1.16 and 1.17