Financial Modelling in Microsoft Excel/Overview

Financial models need to be:

  • useful – they need to assist the user in solving the business problem
    • This needs good business analysis and design skills
  • accurate – they must do exactly what they say they do
    • This needs correct logic, accurate calculations & relevant results
  • flexible, so they can evolve throughout the analytical process and beyond
  • provable – the inputs, calculations and results can all be verified

This needs clear layout, good documentation, data validation & results testing.


A good guiding rule is to keep things as simple and as clear as possible, for example:

  • using common functions rather than complex or rarely used functions
  • keeping formulae short
  • not being "clever", which may just confuse other people
  • separating the spreadsheet into clearly marked sections

Code Complete, the classic book on programming by Steve McConnell, says that managing complexity is the major imperative.

Last modified on 4 September 2009, at 18:38