Developing smart and effective financial models that deliver results by Colin Human. Delivered at the Financial Modelling Summit 2021

1. Financial Modelling Summit 2021 – Internal Use Only
Speaker: Colin Human
CEO, Goalfix Financial Modellers
Financial Modelling
what’s it all about?
23 June 2021

2. Financial Modelling Summit 2021 – Internal Use Only
FINANCAL MODELLING OVERVIEW
Developing smart and effective financial models that deliver results.

3. Financial Modelling Summit 2021 – Internal Use Only
HIGH LEVEL
Building Financial
WHAT IS A FINANCIAL MODEL?
Financial modelling is the identification, assembly and distillation of all relevant
components of a business case, in a logical and structured manner, into a
flexible predictive tool for the evaluation of financial performance
Customised set of interconnected dynamics, structured spread sheets where
outputs, generally in the form of time related financial statements and analysis,
are based on predetermined variable inputs.
Modelling is a process – it can be learned, internalised and repeated
The process of modelling is creative, analytical and mechanistic
It requires genuine commitment (concern) regarding the validity of the
results
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HANDS ON
HANDS ON

4. Financial Modelling Summit 2021 – Internal Use Only
REAL WORLD AND MODEL RELATIONSHIP
BUSINESS
SITUATION
MANAGEMENT
INSIGHTS
CONCEPTUAL
MODEL
MODEL
INSIGHTS
SPREADSHEET
MODEL
COMMUNICATE
UNDERSTAND
INTERPRET
ANALYSE
ENGINEER
REAL WORLD MODEL
Building Financial
Source: Bert Verstraete – f1f9

5. Financial Modelling Summit 2021 – Internal Use Only
RATIONALE FOR FINANCIAL MODELS
Optimise shareholder returns - manage for results
Financial models allow management to make smart decisions
Most effective predictive, flexible financial planning tool
Evaluate and quantify strategies
Identify risk – detect and define input sensitivities
Allow “what-if” analysis and alternative scenarios
Easily adjustable to changed circumstances
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6. Financial Modelling Summit 2021 – Internal Use Only
Comprehension
Structure
The building process
Analysis
Finalisation
Protection
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KEY COMPONENTS
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7. Financial Modelling Summit 2021 – Internal Use Only
Understanding the business case
The single most important step
Identify and quantify the key drivers of the model
Understanding the purpose
Defining the model output – the key results required
The insight the model provides
Creating the model specification
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COMPREHENSION
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8. Financial Modelling Summit 2021 – Internal Use Only
The model sequence and structure
The duration and time series
The input sheet - all key drivers of the model
The support schedules
The flow of information
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STUCTURE
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9. Financial Modelling Summit 2021 – Internal Use Only
ANATOMY OF A MODEL
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Business Case
Specification 2. Input
3. I/S schedules
Schedules
4. B/S Schedules
6. Cash Flow Executive Summary
5. Income Statement
7. Balance Sheet
Sensitivity Analysis
Data Tables
Scenarios
Ratios & Returns

10. Financial Modelling Summit 2021 – Internal Use Only
Sheet template – consistency across all sheets
Column Headings – dates and column numbers. – XIRR, XNPV
Information flow from input to support schedules to financials
Formula construct – simplicity – integrity – transparency
Use of formula sets – (calculation blocks) - FAST standard
Financials – 3 way – income statement (IS), cash flow
statement (CF), balance sheet (BS)
Validating accounting principles – balancing BS using CF
balance
Cardinal rules – hardcoding, referencing blank cells, formula
consistency
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BUILDING THE MODEL
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11. Financial Modelling Summit 2021 – Internal Use Only
Calculate Cash flows, CFADS, Net cash flows, XIRR, XNPV
WACC %, Debt Equity, IRR%, NPV – relevant to purpose
Ratios and Returns
Sensitivity
Scenarios
Data tables
Graphs
Executive Summary
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ANALYSIS
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12. Financial Modelling Summit 2021 – Internal Use Only
Control sheet
Index – easy navigation
User guide
Model flow chart diagram
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FINALISATION
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13. Financial Modelling Summit 2021 – Internal Use Only
Work sheets
Workbook
File
Back up copy
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PROTECTION
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14. Financial Modelling Summit 2021 – Internal Use Only
Thank you!
Speaker: Colin Human
CEO, Goalfix Financial Modellers
www.goalfix.co.za