A concert pianist would never be able to play with such skill if they didn’t know their scales and arpeggios.
It is the same for financial modelling too. When discussing potential courses, I am often told that modellers need an advanced course. But do these modellers know the basics and exactly how advanced are they? Advanced modelling should not be about over-complicating the model. It should be about applying the basics to a problem and creating a neat and logical solution in the most efficient way possible.
What are the basics of financial modelling?
- Picking appropriate functions and simplifying formulae as much as possible. Some functions make mountains out of molehills, including the much overused and long-winded IF function.
- Knowing the keyboard and shortcuts. Any athlete knows that it is the marginal gains that give a competitive advantage, so don’t waste time with poor keyboard skills.
- Keeping logic in mind at all times. Over-complexity is not impressive in a model despite what many may think.
- Concentrating. Phones and email pop-ups break focus and are a hindrance to logical thought.
- Sticking to the basic rules. This minimises the scope for errors.
Only when the basics are mastered can modellers move forward. Excel is capable of so much, but it is also a dangerous and time-consuming tool in the wrong hands. There is always a lot of learning to do, even for the experienced.
There are plenty of blogs on these subjects on this website and here is a selection of some of these which may help:
Functions and avoiding the IF function.
https://camillaculley.com/2022/07/what-is-wrong-with-the-if-function/
Keyboard and shortcuts
https://camillaculley.com/2019/03/shortcuts/
Logic
https://camillaculley.com/2023/06/lets-talk-about-circularity/
https://camillaculley.com/2022/03/why-does-timing-matter-in-financial-models/
https://camillaculley.com/2021/03/simplicity-is-the-ultimate-sophistication-leonardo-da-vinci/
Concentrating
https://camillaculley.com/2022/06/would-you-check-your-phone-whilst-driving/
Basic Rules and Top Tips
https://camillaculley.com/2024/02/top-five-modelling-rules-and-top-tips/
And on Excel proficiency:
https://camillaculley.com/2023/02/what-is-excel-proficient/