Small things make a difference

FINANCIAL MODELLING EXPERTS

Author:

Alex Arnold

Published:

07 Jul 2014

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Guest post from Bert Verstraete – Rebel Group.

In a recent blog post, F1F9’s Andrew Berkley raised the question: “What if my existing model isn’t FAST?

Andrew proposed a model rebuild as being the most efficient solution.  But for me, this is not the only answer.

Over the last few months, I introduced some (graduated) engineers into the world of economics.  For the first time they heard words like: debt, equity and internal rate of return.

At the end of the course, they were asked to make a business plan.  To help them, I gave them a very small Excel file.  They could use this to draw up some figures and statements (making sure to apply the FAST standard of course!).

Even though they were all convinced about the appropriateness of FAST, one student decided to create his own model. I didn’t think this was a problem.

Last week, I saw him freaking out behind his computer screen. He had hit a hurdle and asked me if I could help. He tried to explain his non-FAST model to me.  And I tried to understand it…

Had it been a FAST model, the issue would have been spotted quickly.

After 10 minutes, running through his small model we found what was going wrong.  Everything was in the model, except for taxes.  He had no idea how to model the carry forward of taxes. And there, I could help him with my FAST model.

I gave him my tax calculations from my FAST model. I told him to replace some of my rows with the results of his earnings before tax computation. We then look at the result: the taxes he wanted to calculate.

And so we found a solution and a new believer in FAST modelling.

Rebuilding an entire non FAST model is not always the best answer. Sometimes you can adapt a non FAST model with a FAST solution.  This won’t solve all issues, but it is a step in the right direction.



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Alex Arnold
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Alex Arnold
Alex has a background in account management and fundraising. She has been with F1F9 since 2012 and is responsible for its training business.