A financial model should incorporate an Assumptions worksheet that outlines the key features of the financial model, such as the relevant tax rate or financial year-end. It helps to eliminate the continuous need, while you are building, managing or updating a financial model, to constantly input and hardcode essential financial model features such as business unit names, or financial year-end.
Here is a simple example of an Assumptions worksheet.
Structuring your financial model for better Financial Modelling
The Assumptions worksheet helps to make your financial model more clean, succinct and consistent from the Import Worksheets, financial and other operational calculations through to the output and Export worksheets. It’s advisable to define the named corporate business unit, divisions or subsidiaries with a constant format i.e. business_unit_1.
The great thing about extra Financial Model leg-room
The Assumptions worksheet enables you, via the creation of the above mentioned generic defined names, to build added room to account for new, additional or renamed business unit, facilities or assets into the future financial model versions, without the future need to fully rework, re-engineer an existing model which you’ve worked on and built the trust of superiors, colleagues and clients.
Achieve greater consistency with your Financial Modelling
The Assumptions worksheet will help to avoid typos, model naming inconsistencies and related errors which can easily occur if business unit or asset names are hard coded separately on individual worksheets. It will also enable easier financial model auditing and due diligence before the final financial model is presented to executives, peers or clients.
Build your Financial Model with an Assumptions worksheet now!
The inclusion of an Assumption worksheet into a financial model will help financial model users to better conceptualise the financial model process flow and structure, give the financial model added leg-room for future model enhancements, and achieve model consistency and in turn reduce financial model input error.
Thanks, Simon – I couldn’t agree more!