“If you can’t describe what you are doing as a process,
you don’t know what you’re doing”
W. Edwards Deming

Inserting your financial model databook, within your financial model

Written by Hedieh Kianyfard

Sometimes financial models are accompanied by another document called “The Databook” or “manual for using the Financial model”. I don’t like to call it a manual, as I agree with Elon Musk in that any product that needs a manual to work is broken!

To me, the purpose of the Databook is to provide the key technical, financing and project assumptions and give an overview of the cash flow projections and the main results of the financial model.

Usually the busy investment officers appreciate this document and use it to quickly extract information from it and use it with the project documents. Although I really like the idea of having a databook, personally I can’t handle updating it every time that I am circulating a different version of the financial model. So, I decided to include the databook within my models and link it to the model input sheet and Dashboard.

I would like to know what you think about the idea of having a databook along with the financial model and what you think are the important topics that should be included in the databook?

You can find a sample Databook sheet in the Excel file. Click here to download.

Below are the content headings of atypical financial model databook.

1. Model overview

1.1. Colour-codes
1.2. Worksheets description
1.3. Macros
1.4. Financial model flow diagram
1.5. Periodicity

2. Project overview

3. Key assumptions

3.1. Project schedule
3.2. Construction cost assumptions
3.3. Financing assumptions
3.4. Operating assumptions

3.4.1. Technical Assumptions
3.4.2. Revenue Assumptions
3.4.3. Operating Cost Assumptions
3.4.4. Major Maintenance Assumptions
3.4.5. Working Capital Assumptions
3.4.6. Tax Assumptions
3.4.7. Dividend policy

4. Output results

4.1. Sources & Uses
4.2. Key Ratios and Returns
4.3. Sensitivity summary results

Monte Carlo simulation – New handbook guide

One of our latest financial modelling handbook guides is on Monte Carlo simulation.

We are really grateful to Gerald Strever for putting it together. Gerald is a leading expert on financial modelling and spreadsheet techniques. He is the Senior Managing Partner at Finance Training Solutions, specialising in Financial Strategy, Business Modelling and Company Valuation, and is based in Johannesburg.

It is a great topic for a handbook guide.  The topic itself has a great reputation for being complex – and like many things of complexity deserves a simple explanation. This guide gives an explanation that is both simple and practical.

The guide shows an approach to Monte Carlo simulation that requires nothing more than standard Excel. That’s not to deny the importance of software packages that work with Excel, but it is useful to see what can be done with RAND() and data tables.

Finally, it must be one of the longer guides published.  At 26 pages, it contains a lot of content – and it deserves your comments. We encourage you to download the guide and the accompanying Excel workbook – and let us know what you think.

Click here to see the guide.

Give it away for free

By Andrew Berkley.  Andrew has taken on the role of Financial Modelling Handbook editor from Kenny Whitelaw-Jones.  He will hand on the role to a new editor at the end of 2014.

How many PC users know that you can put spaces in between words in Microsoft Word?

Answer: almost all of them.  And if they don’t, then something might be very wrong.

How many PC users know that you can put spaces in Excel formulae?  Answer: not nearly as many as use spaces in their Word documents.

Once they have the information, people can judge what best to do: is it better to have spaces in Excel formulae – yes or no?  What are the pros?  What are the drawbacks?

People can make these judgments once they have the information.

So when I am asked why the Financial Modelling Handbook is giving away so much for free, the answer I give is that it is good for everyone to have this information.  It might make the world a better place.

When it comes to financial modelling, we should not be trying to claim intellectual property on pure knowledge.  Nor on the evaluation of that knowledge.  Nor – dare I say – should any intellectual property be claimed on Excel coding that uses standard Excel functions and syntax.

As we start to share information freely and without bounds, good things begin to happen.  We have seen this in all the handbook contributions to date (that have been downloaded over 4,000 times) and the discussion that has arisen to date.

Topics of common interest emerge that never might have been identified had someone tried to write this on their own.

Experienced modellers find a way of sharing what they have learned without feeling under threat; less experienced modellers take on skills and knowledge more quickly and effectively.

It could be happening more quickly, of course.  And it is equally important that we get the content as good and clear as we can.  That way, people are more likely to improve upon it.

I would also like to see more material on foreign exchange – it is a huge topic and one that tests to the limit a modeller’s economic and accounting knowledge (not to mention their spreadsheet skills).  I will do my best to make that a priority in the next few months.

And we can take more simple stuff too.  I was chatting to a director of a well known transport business at a school sports day recently and he told me how fluent he was in using the SUM function.  His fingers know exactly where to go on the keyboard: “equals” sign, S, U, M, open brackets…

And I shared with him the little piece of knowledge that if everyone knew might make the world a better place: Alt + equals sign.

Your feedback on the Financial Modelling Handbook

A few weeks ago we asked you for feedback about the Handbook Project and the guides we’d released so far. Lots of you replied and gave us really useful feedback – thank you!

Overall usefulness

Overall it seems that most of you are finding the guides useful. 85% of respondents said that all or most of the guides had been useful. When asked which guides had been the most useful answers covered the whole range of guides; meaning that each of your are finding different things useful which I take to be a good thing!

Suggestions for additional modelling guide topics

We asked you for suggestions on topics that you would like to see guides on.  We used the answers to this list to create a Pipeline page. We’ve listed all the ideas there (including some new ones that we came up with during our F1F9 Handbookathon).

Feel free to add comments to that page to suggest more topics; and feel free to volunteer to create a guide if there is a subject on that list that you have expertise on. We have added some additional guidance on how to contribute to the financial modelling handbook project.

Making the handbook more useful

In answer to this questions lots of you said lovely things like “just keep going what you’re doing” or “just keep churning them out”. Thank you for that vote of confidence. We plan to. We also got lots of good suggestions for improvements which we were also grateful for.

1. Publish a pipeline. Lots of you suggested this. We’ve actioned that here. Now you’ve no excuse for not getting involved.

2. Drop the “generic pages”. Quite of a few of you suggested this (sometimes in quite colourful language e.g. “drop all that useless fluff at the beginning”, “enough of the marketing crap”). Seems that as modellers many you just want to get straight to the detail! I understand that. Our aim with the guides was to try to make them more visually interesting than these things often are and to make each one represent the project as a whole on a stand alone basis. We’ll give some thought as to how we might better meet both of these requirements but it may not change soon. (We’re all working on this project in addition to our day jobs!) My apologies to those of you who find that annoying.

3. More detail required. Some of you felt that the guides were a little simplistic. Noted. At the moment we’re laying the groundwork; covering the basics and the essentials. We’ll get into more detailed stuff as we progress.

4. Add videos. A few people suggested this. We’re not planning doing video guides at the moment. The thrust of the project is to write a book collaboratively. We’re going to focus on that one objective.

5. Receive the download link in the notification email – don’t make us come back to the site to fill in our details and wait for a second email. This is a no brainer. From now on when we publish a new guide we’ll put the download link directly into the notification email. Thanks to all of you who suggested this.

6. Less of your marketing. Ouch. Point taken. If you only sign up through the handbook site we won’t ever send you any F1F9 marketing. We’ll just send you notification emails about the handbook project. If you want you can unsubscribe at any time. If you sign up through the F1F9 site for F1F9 content we may send you the odd marketing email. Again we try to keep them useful and you don’t like them please, please unsubscribe! We’ve also added different subscription options, so you can opt out of the type of emails that you don’t want to receive. The last thing we want to do is send you something you don’t want.

Would you like to contribute to the project?

Lots of you said that you would but that you didn’t know how to or what topic to add. Now we’ve published the pipeline list you can see some topics that are available. We’ve also published some more guidance on how to contribute.


Handbook-athon! 15 new guide topics

A couple of weeks ago the F1F9 modelling team had a full day “Handbook-athon”. The team came up with ideas for 15 new modelling guides. They then split into small teams and started to write the content for them and create the model example files. The new topics have been added to the Pipeline list.

Check out some of the pictures from the day.

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The first product of the “Handbook-athon” is the How to model index linked bonds  guide.


This week’s guide has been put together with Andrew, one of the modelling instructors at F1F9 and looks at depreciation calculations. You’ll see a use of SUMIF that you might not have come across. There are lots of ways of doing these kinds of “look backward” or “look forward” – this is one way that we have found to be useful.

I’ll be taking a break over Easter. After Easter I’ll be sending out a quick survey to find out what you think of the material that’s been produced so far, and what our priorities should be over the next few months. We’ll be publishing a list of “topic ideas” that you may be interested in contributing and also making it clearer how to contribute. Watch out for all that after Easter – as well as our first modelling guide translated into French.

p.s. We will be running a webinar on “Debt Sizing in Excel” on May 8th. The webinar will look at 4 different debt sizing methods using case examples in Excel that we will then share after the webinar. I know it’s cheesy marketing speak to say that it’s “filling up fast” and to “reserve your place now”, but the truth is that we announced it on Thursday and it really is nearly full; we only have capacity for 1,000 people. If you’re interested you can sign up here – Debt sizing in excel

3 New Handbook Guides

It’s been a busy old winter period – although the number of new guides published might not reflect this. To celebrate the onset of spring we have released 3 new guides over the past two weeks, with a lot more in production.

The latest guides are:




We have had a number of new comments posted over the past week and the offer of contributions from all over the world – keep your eyes peeled for a French language handbook guide and spreadsheet that is due to be posted over the next few weeks, the first of many I hope.

If you have a modelling topic that you’d like to tackle but aren’t sure where to start, please get in touch and I can help you create the guide – what we really want to harness is the knowledge, once that is shared I can make sure the guide fits the handbook style.

Likewise, if you’d like me to get to work on a specific topic that you think others would benefit from, please leave your comments and suggestions on the site. Feels like we’re starting to make progress at last!

New contribution: The Devil’s Guide to Spreadsheet Creation

Huge thanks to Patrick O’Beirne for the latest contribution to the handbook – The Devil’s Guide To Spreadsheet Creation. This is a great, light-hearted way to end the year. Patrick really nails the annoying things we’ve all seen people do when it comes to building spreadsheet models.  My favourite from his list is “Never simplify, that just makes it’s easier for other people to get your job”. I think so much complexity in modelling serves the interest of the modeller and nobody else!

I’m about to wrap up things up for 2013.  We’ll back in 2014 with lots of new modelling guides and we’ll be starting to build out the case studies as well. If you’re an experienced modeller with sector specific insight, consider getting involved as a co-author of the handbook. Find out how to contribute.

New contribution: How to reduce file size in Excel

One week ago we formally launched the modelling handbook project. I must admit I was somewhat nervous. It’s always easier to tell yourself that something is a good idea before you’ve released it into the world.

So far the feedback has been positive. I’ve received useful feedback and had a good number of requests from people who want to contribute. I’m also in discussions with individuals who are interested in translating the guides into both French and Spanish. It seems like we might be on to something with this crowd-sourcing idea!

The top 3 modelling guides this week (by Slideshare views) were:
1. FAST Financial Model Design (by Emily Cowan)
2. Calculating reserve account balances using MMULT (by Dhruva Poonia)
3. How to display forecast and actuals on one chart (by Andrew Berkley)

Well done to Emily for being at the top of the list at the end of the week 1!

This week Mayank Jain from the F1F9 modelling team has written a guide on How to reduce file size in excel models. We get this question often from training and model build clients who find that their models get very large even when they are not especially complex. Please leave your comments on the model guide page if you have any suggestions on how to improve this section of the handbook.

Introducing the Financial Modelling Handbook

Nobody is as smart as everybody – Kevin Kelly, Wired Magazine

Although I started boring people about my ideas for this project more than 2 years ago, I’ve only started promoting the Handbook more widely in the last month. So if you’re visiting the site for the first time, welcome. If you’ve been visiting over the last couple of years hoping to see some progress, thanks for your patience!

There are lots of good books about Financial Modelling. As useful as many of them are, they all represent one person’s view on how modelling should be done. With this project, I am trying to change that by writing a book that draws on the wisdom and experience of the wider modelling community.

I was inspired to start the Handbook by books like Business Model Generation, David Roodman’s open approach to writing his book Due Diligence, and more recently Unboss. These books were co-created by distributed groups of experts who share a passion for their topic.

Over the past few years I have taught lots of people to build models and each time I teach a class I learn just as much as the students. New insights are emerging all the time as people apply the principles of FAST to their area of modelling. It would be a wasted opportunity to write a book without tapping into all that great knowledge.

I realise there will be some who think that this is a cynical F1F9 marketing gimmick. It is not. It is an attempt to write a genuinely better modelling book.

I will not be making any money from this project and neither will F1F9. It is a non-profit venture. The whole guide will be available for free online. The modelling guides should develop into a very useful modelling reference library. In due course a hard-copy version will be available to purchase. If sales of the hard-copy version generate any profits, these will be given away to charity.

We will continue to publish small sections of the book regularly. These have been grouped together as financial modelling guides. These guides can be viewed and shared online, and freely downloaded in PDF format. They will be updated in response to the feedback we receive.

The book is based on the principles of the FAST Standard. It will teach some some essential model build skils, as well as looking at applications in particular domains. There will be lots of worked examples.

Find out how to get involved or review what’s been published so far.