Importance of having a structured financial model

Having a structured financial model means to apply a set of rules when building the model and apply them consistently throughout the financial model.
The key words are Rules and Consistency.

That is why it is important to spend some time on figuring out the design of your spreadsheets.

I talk about project finance spreadsheet design in more details in my online course. You can check it out here:
FINANCIAL MODEL SPREADSHEET DESIGN COURSE

Why is it important to have rules and structure in a project finance model?

  • make your models to be user friendly and easy to understand
  • easier to maintain
  • less prone to errors

While sticking to best practice guidelines and rules, you can give yourself creative freedom to design your financial model the way it suits you but your goal should remain to create easy navigation for users.
In this post, I want to show you an alternative way of designing your project finance models and compare the typical horizontal worksheet design with a vertical design layout.

Horizontal Spreadsheet Design Layout

A typical design layout of a project finance model is horizontal and works with columns. Each column has a specific purpose and has horizontal timeline.

In the below example,

  • Column E is dedicated to labels
  • Column F is for constants for example values brought in from sheets dedicated to Inputs
  • Column G is dedicated to units
  • Column H is the sum total
  • Column J is the first time series value

Project finance spreadsheet design horizontal column structure

and one important point is that once you have designed one worksheet within your model, you need to stick to it and apply the same layout across all worksheets in your model.

However, as long as you are consistant and clear with how you structure and design of your worksheets, you can be flexible and creative in how you want to design your worksheets.

In this post, I want to flip a typical financial model of mine and make it vertical.

My timeline will be in one column and each row will represent a period in the model.

Here’s a snapshot of how it looks.

Project finance spreadsheet design Vertical column structure

What are the advantages of vertical design layout?

  • If you are used to building horizontal models , it’s going to be a challenge for your brain
  • it makes it easier to integrate your data in other applications like Power BI
  • Easier to print when tables are in vertical format.

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