DATE: Tue 14 Mar 2017
BY: Stephen Aldridge
Would you send an important document, perhaps a proposal or a contract for example, without spell checking it first? Of course not!
What about spreadsheets? Are you happy sending out a spreadsheet without checking it first? If you said yes, you aren’t alone. When you have a spreadsheet ‘model’ (i.e. a spreadsheet that forecasts the finances of a business into the future) it’s just as important to check your model as it is to check legal documents.
Spreadsheet models can be complex. Spreadsheet models are made by humans. When humans do complex things, they often make mistakes, so shouldn’t you do at least some checking on your model if you know it is likely to have a mistake in it? Maybe checking doesn’t happen as much as it should because it isn’t as easy as spell-checking text – to do it properly takes time.
Here’s the good news – there are some things you can do relatively quickly to check spreadsheet models, but as with all good things, there are some qualifiers. First, you need to be following some good practice principles – we summarise these in our 'SCILS' whitepaper you can find here. These are a set of principles, which when you know them, seem like common sense. If you follow these, you are already on your way to reducing errors in your models. Whilst these principles don’t eliminate errors altogether, it then becomes easier to check for simple errors using tools that can check compliance with good practice. You can download our free tool here, which will allow you to do these checks yourself.
If you don’t have the time to check the quality of your model, we offer a Model Diagnostic Report that assesses how well a model conforms to good practice. If you need greater confidence, consider a Model Audit that checks the logic of the entire model – call us on 0845 869 4960 to find out how we test. Or you could just carry on sending out untested models – after all, what could possibly go wrong?
Stephen is a Chartered Management Accountant and has over ten years of financial modelling experience both at KPMG and Deloitte. His early career included engineering, sales and corporate management roles. In 2004, Stephen joined Numeritas as a co-owner and a Managing Director.
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