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.