Snap to Grid – quick tips for perfect alignment in Excel

There is a setting in the Options -> Edit -> Setting section called ‘Edit directly in cell.

The ‘Edit directly in cell’ related to the way Excel shows formulas in the cell and in the toolbar when you are in Edit mode (which is what you get when you click F2).

Edit directly in cell –activated
When Edit directly in cell is activated the formula in the toolbar does not get colour-coded but the formula in the cell does.

Edit directly in cell – activated
If you choose to uncheck the Edit directly in cell option then you will get the formula in the toolbar colour-coded but the formula in the cell is not.

Which setting is better?
I find it more efficient to work with the ‘Edit directly in cell’ option unchecked. There are two main advantages
1. If you are editing a formula that is longer than the cell (which is almost always the case) then you can see the whole colour-coded formula in the standard Excel toolbar.
2. It is easier for the eye to focus on the same area of the spreadsheet (the toolbar) every time you are editing a formula. When you are copy-pasting sections of a formula or working with the Insert Function dialogs this makes life a lot easier.

This is a functionality that only takes seconds to implement so try both options and find out for yourself which option you prefer.
On of the most common mistakes in project finance modelling is incorrect coding of delay scenarios. The main reason for this is that it is not implemented as part of the core functionality of the model when it is first constructed, cheap but rather squeezed in by a bank analyst as part of the credit analysis.

Since the person coding the delay functionality is often different from the person who originally constructed the financial model it can be challenging to understand all the implications of changing the model logic in something as complicated as a delay scenario.

Example of delay scenarios

  • Delay of start date of construction
  • Delay of completion (i.e. construction takes longer than planned)
  • Delay of divestment date
  • Delay of acquisition date
  • Delay of capital raising
  • Delay of debt refinancing

How can we quickly estimate the accuracy of a delay scenario?

One quick method of getting an estimate of the accuracy of a delay scenario is to prepare a data table (manual or dynamic using the Excel Data Table functionality) with cashflows from a number of scenarios. If these cashflows are plotted then it is often possible to visually identify big picture problems.

This method can save you hours of work if you are on performing your own credit analysis but are not responsible for the modelling on the transaction. You can simply prepare the outputs as illustrated below and send this back to the modelling bank or the sponsor for clarification.

Preparing a table of cashflows for chosen scenarios

In many cases it makes sense to choose the scenarios that you will be including in the credit or investment analysis. In the example below I have illustrated the concept with CFADS (Cashflow Available for Debt Service) but in your specific case it may be more useful with another metric or a combination of several metrics.

Suggested cashflow metrics

  • EBITDA
  • Distributions
  • Revenue
  • Operational Expenses
  • Capex
  • Debt Repayments
  • Cash account movements
Image 1: Cashflow Available for Debt Service for four scenarios

Image 1: Cashflow Available for Debt Service for four scenarios

Image 2: Graph of cashflows from the investigated scenarios

Image 2: Graph of cashflows from the investigated scenarios

Identify problems in financial modelling of scenarios

Generally speaking cashflow movements in scenarios or sensitivities should be smooth and without spikes. In the example in Image 2 there is a big jump in CFADS in periods Ops 1 and Ops 2 which would be a reason to further investigate the correctness of this scenario.

Of course there could still be problems in all the other scenarios too and this method is a top down approach to finding BIG mistakes first (while you can still get someone else to fix them for you!).
On of the most common mistakes in project finance modelling is incorrect coding of delay scenarios. The main reason for this is that it is not implemented as part of the core functionality of the model when it is first constructed, ampoule
but rather squeezed in by a bank analyst as part of the credit analysis.

Since the person coding the delay functionality is often different from the person who originally constructed the financial model it can be challenging to understand all the implications of changing the model logic in something as complicated as a delay scenario.

Example of delay scenarios
• Delay of start date of construction
• Delay of completion (i.e. construction takes longer than planned)
• Delay of divestment date
• Delay of acquisition date
• Delay of capital raising
• Delay of debt refinancing

How can we quickly estimate the accuracy of a delay scenario?

One quick method of getting an estimate of the accuracy of a delay scenario is to prepare a data table (manual or dynamic using the Excel Data Table functionality) with cashflows from a number of scenarios. If these cashflows are plotted then it is often possible to visually identify big picture problems.

This method can save you hours of work if you are on performing your own credit analysis but are not responsible for the modelling on the transaction. You can simply prepare the outputs as illustrated below and send this back to the modelling bank or the sponsor for clarification.

Preparing a table of cashflows for chosen scenarios
In many cases it makes sense to choose the scenarios that you will be including in the credit or investment analysis. In the example below I have illustrated the concept with CFADS (Cashflow Available for Debt Service) but in your specific case it may be more useful with another metric or a combination of several metrics.

Suggested cashflow metrics
• EBITDA
• Distributions
• Revenue
• Operational Expenses
• Capex
• Debt Repayments
• Cash account movements

Image 1: Cashflow Available for Debt Service for four scenarios

Image 2: Graph of cashflows from the investigated scenarios

Identify problems in financial modelling of scenarios
Generally speaking cashflow movements in scenarios or sensitivities should be smooth and without spikes. In the example in Image 2 there is a big jump in CFADS in periods Ops 1 and Ops 2 which would be a reason to further investigate the correctness of this scenario.

Of course there could still be problems in all the other scenarios too and this method is a top down approach to finding BIG mistakes first (while you can still get someone else to fix them for you!).
Depreciation is a key component of a financial model to calculate the tax payable. Of course it is often critical to calculate the Profit and Loss but in project finance many would argue that this has a minor importance when compared to the Cashflow Waterfall which drives all credit analysis.

Clear presentation of the depreciation inputs

Having a standard structure for the assumptions regarding depreciation can save a lot of time. The assumptions can vary slightly depending on the applications but generally you will need a combination of the following assumptions:

  • Asset Category
  • Method of depreciation for Tax
  • Method of depreciation for Accounting
  • Asset life
  • Multiplier (for accelerated Reducing Balance method)

One suggested structure for the layout of the depreciation assumptions for a typical vanilla project finance model is presented below:

depreciation-1

Use Data Validation to facilitate easy updating

Some of the cells above can be coded using Data Validation which greatly simplifies the editing of assumptions from an end user’s perspective.

depreciation-2

A user can simply point and click to choose between Straight Line Depreciation of Reducing Balance.

To set up the Data Validation, visit this site
click Data – > Data Validation and select Allow: List and set the Source to “SL, physician
RB”.

depreciation-3

Linking the Depreciation assumptions to the financial model

This is a bigger topic that will be covered in a separate article but the screenshot below will give you an indication of the flow of information in the Depreciation calculations worksheet of the model:

depreciation-4

Both methods (Straight Line AND Reducing Balance) are calculated for all asset categories but only the selected depreciation method flows through to the outputs. In the illustrated case above only the Straight Line values for the Depreciation Charge flows through to the Profit and Loss.

This structure would be repeated for all categories and for Tax and Accounting.
Depreciation is a key component of a financial model to calculate the tax payable. Of course it is often critical to calculate the Profit and Loss but in project finance many would argue that this has a minor importance when compared to the Cashflow Waterfall which drives all credit analysis.

Clear presentation of the depreciation inputs
Having a standard structure for the assumptions regarding depreciation can save a lot of time. The assumptions can vary slightly depending on the applications but generally you will need a combination of the following assumptions
n Asset Category
n Method of depreciation for Tax
n Method of depreciation for Accounting
n Asset life
n Multiplier (for accelerated Reducing Balance method)

One suggested structure for the layout of the depreciation assumptions for a typical vanilla project finance model is presented below.

Use Data Validation to facilitate easy updating
Some of the cells above can be coded using Data Validation which greatly simplifies the editing of assumptions from an end user’s perspective.

A user can simply point and click to choose between Straight Line Depreciation of Reducing Balance.

To set up the Data Validation, nurse click Data – > Data Validation and select Allow: List and set the Source to “SL, RB”.

Linking the Depreciation assumptions to the financial model
This is a bigger topic that will be covered in a separate article but the screenshot below will give you an indication of the flow of information in the Depreciation calculations worksheet of the model

Both methods (Straight Line AND Reducing Balance) are calculated for all asset categories but only the selected depreciation method flows through to the outputs. In the illustrated case above only the Straight Line values for the Depreciation Charge flows through to the Profit and Loss.

This structure would be repeated for all categories and for Tax and Accounting.
Building a financial model that is cost efficient to audit is a lesson that many Analysts learn the hard way when they receive a quote exceeding their annual salary.

In the worst cases this happens only a very short time before bid date / financial close and it is too late to improve the model and you have to accept what appears to be an outrageous fee for what you thought was a pretty good financial model.

What is the biggest cost-driver for a financial model audit?

The fee for a financial model audit is at large a function of the complexity and the number of unique formulas in the model. The complexity is a big topic in itself and this article will only deal with the topic of minimizing the number of unique formulas.

A unique formula in the world of financial model audits is represented by one range of cells (horizontal and/or vertical) that can be copied from left to right, order
or down the page, page
and the formula remains intact.

In an ideal world you should be able to copy the first column of your financial model (assuming a horizontal timing structure) and copy to the left and the integrity should be intact. If that is the case you have achieved perfect ‘left-right-consistency’.

How to identify unique formulas in a financial model audit?

Using spreadsheet investigation tools this work is done a lot easier. There are a number of third party tools available on the market:

  • Spreadsheet Detection
  • Spreadsheet Advantage
  • Operis Analysis Toolkit (OAK)

The outputs from these tools vary slightly but one quite useful component is what is called the ‘maps’. Theses maps identify the unique formulas to highlight left-right inconsistencies.

Image 1: Perfect left-right consistency in a financial model

Image 1: Perfect left-right consistency in a financial model

Image 2: Unique formulas (and hard-coding) scatted throughout the financial model

Image 2: Unique formulas (and hard-coding) scatted throughout the financial model

How can you keep the costs down in your next financial model audit?

The best way of keeping costs under control in a financial model audit is to work with your model auditor to bring the price down. I would recommend you to ask them to run the first iteration well in advance of a financial decision so that there is plenty of time to fix up and repair structural issues like hard-coded sections.

Another way is to simply run the maps, viagra
or ask your model auditor to do it for you (they should definitely do that for free if you have a good relationship with them) and then work through all rows/columns where there are unique cells but there shouldn’t be any. This will not only save you a lot of money, but more importantly, avoid stress on the Analyst at the last critical stage of the transaction.
Building a financial model that is cost efficient to audit is a lesson that many Analysts learn the hard way when they receive a quote exceeding their annual salary. In the worst cases this happens only a very short time before bid date / financial close and it is too late to improve the model and you have to accept what appears to be an outrageous fee for what you thought was a pretty good financial model.

What is the biggest cost-driver for a financial model audit?

The fee for a financial model audit is at large a function of the complexity and the number of unique formulas in the model. The complexity is a big topic in itself and this article will only deal with the topic of minimizing the number of unique formulas. A unique formula in the world of financial model audits is represented by one range of cells (horizontal and/or vertical) that can be copied from left to right, capsule
or down the page, prescription
and the formula remains intact. In an ideal world you should be able to copy the first column of your financial model (assuming a horizontal timing structure) and copy to the left and the integrity should be intact. If that is the case you have achieved perfect ‘left-right-consistency’.

How to identify unique formulas in a financial model audit?
Using spreadsheet investigation tools this work is done a lot easier. There are a number of third party tools available on the market:

n Spreadsheet Detection
n Spreadsheet Advantage
n Operis Analysis Toolkit (OAK)

The outputs from these tools vary slightly but one quite useful component is what is called the ‘maps’. Theses maps identify the unique formulas to highlight left-right inconstistencies.

Image 1: Perfect left-right consistency in a financial model

Image 2: Unique formulas (and hard-coding) scatted throughout the financial model

How can you keep the costs down in your next financial model audit?
The best way of keeping costs under control in a financial model audit is to work with your model auditor to bring the price down. I would recommend you to ask them to run the first iteration well in advance of a financial decision so that there is plenty of time to fix up and repair structural issue like hard-coded sections.

Another way is to simple run the maps, physician or ask your model auditor to do it for you (they should definitely do that for free if you have a good relationship with them) and then work through all rows/columns where there are unique cells but there shouldn’t be any. This will not only save you a lot of money, but more importantly, avoid stress on the Analyst at the last critical stage of the transaction.
A clear presentation of Sources and Uses (or Applications) of funds is critical for any transaction financial model, this
and in particular in a project finance transaction.

Sometimes this calculation is over-complicated with a large number of off-sheet links and complex lookups. Due to the importance of the Sources and Uses it is even more important than in other sections of the financial model to keep these calculations simple to avoid errors.

What is the link between a line summary and Sources and Uses of funds?

If the cashflow waterfall has been presented in the right way then you should be able to generate you output table of sources and uses of funds by simply calculating the line summaries.

sources-1

As illustrated in the screenshot the Sources of funds are calculated as the line summaries of the relevant cashflow lines in the financial model. Exactly the same approach would apply to calculate the uses of the funds.
A clear presentation of Sources and Uses (or Applications) of funds is critical for any transaction financial model, cheap
and in particular in a project finance transaction.

Sometimes this calculation is over-complicated with a large number of off-sheet links and complex lookups. Due to the importance of the Sources and Uses it is even more important than in other sections of the financial model to keep these calculations simple to avoid errors.

What is the link between a line summary and Sources and Uses of funds?
If the cashflow waterfall has been presented in the right way then you should be able to generate you output table of sources and uses of funds by simply calculating the line summaries.

As illustrated in the screenshot the Sources of funds are calculated as the line summaries of the relevant cashflow lines in the financial model. Exactly the same approach would apply to calculate the uses of the funds.
Preparing an Excel spreadsheet for distribution to other people requires an additional focus on presentation. This article outlines a very quick trick to significantly improve the alignment in Excel which can improve presentation from good to excellent in seconds.

What is ‘Snap to Grid’?

Excel objects (images, doctor
charts, controls, etc) are placed on top of the grid lines instead of being aligned to the grid in the same was normal cells are. The ‘snap to grid’ functionality enhances the standard Excel setting to make sure that all objects are perfectly aligned to the cell grid lines which improves the professional look and feel of your spreadsheets.

If you look carefully at the image below you will see that the graph does not align with the grid lines in the corners. Some people argue that this is only a subtle difference, but in my view this is as important as having professional presentation in your Word documents.

snap-grid-1

How do you activate ‘snap to grid’ in Excel?

Activating ‘snap to grid’ is easy. If you don’t already have the drawing menu activated the click View -> Toolbars -> Drawing and select the Drawing Toolbar.

snap-grid-2

You can now in the Drawing Toolbar select Snap -> To Grid.

snap-grid-3

If you now try and resize the graph from our first example you will note that the corners are ‘sticky’ and can only be resized in quantum steps which achieves alignment with the grid lines.

snap-grid-4

The image below is zoomed in on the chart to show the effect of ‘snap to grid’ on the corners of the graph.

snap-grid-5

Shortcut key to ‘snap to grid’

Instead of going through the Drawing Toolbar – > Snap – To Grid process, you can hold the ALT key while clicking and dragging the corners of the chart.

In a similar spirit you can also hold the Shift key while re-sizing any object in Excel to keep the height-width ratio unchanged.

Recent posts by Rickard Wärnelid

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Comments for “Snap to Grid – quick tips for perfect alignment in Excel”

  1. Gavin Townshend says:

    Very simple technique that adds that little extra edge (excuse the pun) to your model presentation. I use this shortcut key all the time now after learning about it recently.

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