23 Jan 2012 at 5:11pm
Does anyone have any tips for professionals in CFO type roles on how to effectively review models that others have build. Any good tool or tips to be able to better understand them.
Model Review
Go back to Professionals
13 Feb 2012 at 9:48pm
I have found that it is critical for the model builder to be very diligent in their documentation and formatting of the model in order to achieve a very readable and easy to review model.
In general, the builder should keep inputs together and use a consistent format (font size/colour) throughout the model. Also to preform calculations in the simplest way using the simplest formulas which is always easier said than done.
19 Feb 2012 at 11:10am
@Joel Exactly right!
24 Mar 2012 at 11:59pm
I have found one of the easiest and "cleverist" tools out there and its called spreadsheet studio. look it up. Its makes reviewing a model like looking at a painting and seeing that the nose is out of joint !
It has functionality that applies colours to inconsistent horizontal formulas. Picks up hard coded numbers vs formulas, shows dependents by type (internal, external) and has a model navigation tool second to none.
Have a look on the web and I even think that its available free as a trial version.
I have found it incredibly useful, albeit I've designed some pretty complex models in the past, its never easy reviewing someone elses model. With studio its very powerful and very easy.
http://www.spreadsheetstudio.com
6 months free it says...highly recommended.
I would also get up to speed on excel formulas and how these are used as a good understanding how to read a model is pretty important to picking up issues if you need to dig in a little deeper.
Cheers
MC
26 Mar 2012 at 8:49pm
If hear the litmus test focuses on documentation, but I think that's weak. People can turn out reams of drivel, like a student thesis that doubles as a door stop. If it's un-intelligible, then it's useless.
For me, the critical question is, can either I, the model author (after being away from the model for 2 weeks) or somebody else, return to maintain it?
The good models I've seen (and produced) have the following characteristics:-
- Consistency - naming, structures, etc.
- Separating out parameters - and this should be broken out into separate columns if there's a time dimension.
- VBA instead of complex, chains of cells - easier to debug, validate, etc.
- Documented data flow - showing how the data transforms from one process to the next
- Separation of data (parameters) from computations
- Use of domains, etc. for choice items
- Log history - I fear updating a model that is "out of date"; I look to see if the person who wrote the model documents changes religiously.
- Use of a separate calculation engine model from the data.
Color coding features like that offered by Spreadsheet Studio, while nice, is something that the author should have done from the get-go. If the author couldn't be bothered, then I question what else didn't bother the author?
04 May 2012 at 10:36am
Depends on the model. Transaction based models with a clear metric can best be monitored by the CFO by keeping a mini model and applying a materiality check between the mini model and the full financial model on the key metrics.
The mini model will be simple, small (One sheet) and take a lot of shortcuts that the full financial model cannot. It should be developed independant of the full financial model.
This in my experience is the best way to ensure the integrity as a model manager. Obviously a very experienced and structured analyst in the first place helps this end.
Regards,
Shane
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