Of course, there are different ways of approaching financial modelling. But here are the six worst modelling habits:
1.Not taking enough breaks
It is evident during my training courses that proper coffee breaks revitalise and that a 45-60 minute lunch break (with no alcohol and away from computers) leads to a far more productive afternoon of financial modelling than when people eat a sandwich at their desk.
It is also clear that not much useful modelling is achieved after about 6pm. I recently heard of a software house which sends home its employees at 5pm as it doesn’t want to run the risk of errors from over-tired staff. Perhaps financial modellers should be treated the same way.
2. Writing long formulae
How is anyone expected to understand a 62 bracket 5-line formula? Good model design and function choice means that long formulae should never be needed. One of the causes of this is the over-reliance on the IF function, which is used far too often to solve (inefficiently) a multitude of problems. And remember that the solution is often easier than you think. See my blog on structuring formulae.
3. Believing that the computer always has the answer
Just because the computer says so, doesn’t make it right. Logical thought processes can only come from the modeller. Therefore, please engage brain. For example:
- think about why circular references are illogical
- think about why copy paste macros are inefficient and unnecessary
- think about why a surprising result has appeared
4. Multitasking
Multitasking drops the performance of a Harvard MBA to that of an eight-year old and makes us 40 per-cent slower. According to Tony Crabbe’s excellent book “Busy”, on average we are interrupted by an email every 5.2 minutes. We may feel that we are being productive when we are answering those emails, but actually we are achieving very little of value. Concentrating on the task at hand has become very difficult. Therefore, please switch off email popups and put phones away whilst modelling.
5. Breaking the rules
Be consistent and stick to the rules. I‘m not going to repeat my standard modelling rules here, but you can find them at my blog on top financial modelling tips.
6. Using the mouse
Please imagine trying to play the piano with a mouse. Beethoven’s sonatas just would not sound the same. See my blog on shortcuts here.