The Inputs section of any financial model is as important as any other section. In fact, no matter how well built the model, if the inputs are wrong, the model will be wrong. Remember GIGO- Garbage In Garbage Out.
Some useful tips and tricks that are important to keep in mind when working on the inputs:
- Clearly identify the input area (colours, arrows to tell the user exactly where to paste the info etc)
- Rather use light colours for input cells as it is easier to see the contents of lightly coloured cells on a black and white printout.
- Also it is better to colour the entire cell rather than to apply a colour to the text or numbers. This is because if the cell is empty it will be unclear whether it is an input or not.
- Document the source of key inputs and assumptions.
- Establish a border within which the calculations work (watch the video to understand this)
- Utilise relevant business terminology
- Include descriptions and comments for clarity
- Clearly label the units to be used, and even better, use formatting to indicate what the cell represents e.g. R’s, kgs etc
- Protect cells with formula in them (even without a password). It is exceptionally easy to accidentally overwrite a formula when you think the cell is an input.
The video clip below highlights the above points.
To follow along go to 1.14, 1.15, 1.16 and 1.17