The financial modeling handbook emphasizes the importance of collaboration in creating efficient financial models and provides guidelines for a default model design. Key recommendations include maintaining a consistent column structure, using clear headings, applying positive as normal sign conventions, and ensuring unique labels for calculations. The guide serves as a foundational resource for building financial models, suggesting practices that enhance clarity and reduce errors.

3. Financial modelling should be collaborative. Collaboration
reduces error, speeds up development time and lowers
cost. The Financial Modelling Handbook is a collaborative,
crowd-sourced guide to building better financial models
using the FAST Standard.

4. Emily Cowan is Director of the
FAST Standard Organisation.
Previously she led the Financial
Modelling Team at Grant Thornton
and has also worked at Macquarie
Bank.

5. In financial modelling, consistent, uniform design
increases efficiency and reduces error.
This modelling guide sets out some
recommendations for a “default” model design.
This will often have to be adapted, but it’s a good
place to start.

6. It’s important to have consistent column structure across your model.
Changing column structure once a model is built can be painful and error
prone.
The column structure you will need for your model will depend on the
requirements of that model. The structure in this guide is a good default
starting position.

7. Columns A, B and C are reserved for headings. Clear headings help
users of the model to understand what is going on.
Column A: Section headings
Column B: Sub-section headings
Column C: Sub-sub-section headings

8. Reserving specific
columns for each type
of headings gives a
number of benefits.
Formatting can be applied
to the whole column and
therefore all the labels at
once. Select the whole
column using Control+
spacebar
Also headings can be used
to navigate up and down
the page using Control +
up and down arrows

9. The FAST standard recommends a
“positive as normal” sign convention.
This means that inflows and outflows
are shown as positive numbers in input
and calculation worksheets.
The text in Column D has been right
aligned to allow a helpful indicator to show
when line items are being added and
subtracted

10. Each calculation in the model
should have a unique and
descriptive label.
When that calculation is linked into
another block, the label will also be
linked to in Column E.

11. In most models, there will be inputs and
calculations that do not relate to a
specific time period. Column F is
reserved for those numbers.
For example in this model, the gas
consumption factor does not change
over time. It is therefore displayed in
the constants column, Column F.

12. In many financial models there will be a
mix of financial and operational
calculations. It’s important to include a a
clear unit label for each line item.
Clear unit labelling also helps to
reduce errors that can creep in when
converting units.

13. Row totals contained in Column H are for
information only. They are not used in
calculations. It is often useful to see the
order or magnitude of a line items.
New row totals are only added to
calculations, usually the last item in a
calculation blocks
When line items are linked, the row
total is linked as well and does not
need to be recalculated.

14. There is frequently a requirement for
calculations to look back one period.
This is especially true in the calculation
of balances where the opening
balance in a given period is equal to
the closing balance in a previous
period.
Leaving a blank column before the time
series columns begin allows a very simple
approach to calculations that look back
one period.

15. Columns from J onwards each
represent one modelling period. Model
periodicity will change from model and
can range from hourly to annual.
The formulas across the timeline from
column J onwards should all be the same.
This makes review and checking easier
since each column does not have to be
checked individually.

16. Each column should have a single purpose.
Column structure should be consistent across similar types of
sheets in your model. i.e. all your monthly calculations sheets
should have the same column structure.
Column structure need not be the same between models since
there will be model specific requirements. What is contained in
this guide is a good starting position.