A financial model, by its very nature, is full of formulas and calculations. Although most of them are simple, their volume and repetitiveness create an exposure to errors that could give the most accomplished modeler nightmares when trying to track them down.
The following are some of the procedures to adopt in your model in order to reduce this exposure:
- Hardcoded cells: These should be distinguished by using a blue font. The following screenshot shows hardcoded cells in a blue font, to distinguish them from calculated cells, which are in the standard black font:
If a model has to be modified, it is these hardcoded cells that will need to be adjusted to effect the required change. Using the blue font reduces the time it will take to navigate to the cells that need to be modified.
Balance check: Creating a balance check for the...