I have been building and reviewing financial models for 10 years, the last 2 of which has been in the PFI/PPP arena. Traditionally in this area there was a clear Construction phase followed by an Operations phase. As Nick pointed out in his article, on more and more projects this simplistic approach is no longer appropriate.

My initial experience of modelling did not require such phases, so when I saw models with a Construction calculation sheet and then an Operations calculation sheet, it looked odd to me. Yes, individually several formulae were simpler, but overall I found this approach far too restrictive to cater for the more complex project requirements as described by Nick.

From a financial modelling point of view, splitting a model into phases (such as Construction and Operations) should simply be a presentational thing in the final outputs, not an issue in a model’s structural design.

In some cases, it will be necessary to have more complex formulae to seamlessly ‘transition’ from monthly to semi-annual periods, but that’s the sort of detailed technical challenge that good modellers thrive on (or should, in my view).

As usual, of a financial model, the cardinal rule of GIGO applies. Given a transactional model involves a lot of stakeholders and each has a hand in providing the input and assumption, maybe in your next article you should share some of your experience in dealing with the parties providing the inputs (and quite often the inputs are of varying level of granularity and quality).

Not sure if its appropriate for a financial modelling website to deal with project management but you have to admit, as a transactional modeller, project management is just as an important skill set as Excel.