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Getting your financial models right

Financial models are vital tools in modern business, but are highly susceptible to being ruined by their creators' bad habits. ICAEW decided to turn this situation around by developing a new code of practice.

Use of spreadsheet financial models has become ubiquitous in business, which would seem reason enough for a responsible organisation to create a best-practice document on them. But perhaps the need for guidance wasn’t pressing. While financial models are widely used to inform decision-making, there is evidence to suggest that many models have been created without attention, care or planning, likely put together by someone who is self-taught. Over time those models have been subject to a lack of review.

Additionally, those who buy in their models may have ended up with a product not suited to their needs, having failed to articulate them clearly at the outset to a developer or provider. Some modelling methodologies, ICAEW says, can even be “overly prescriptive or organisation-specific”.

This is an extract from the Business & Management Magazine, Issue 274, May 2019.

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