Building a robust and flexible financial model is a critical task for businesses. Whether you’re trying to secure funding for your startup, track your company finances, or plan for your company’s future, having a solid model is essential. But what exactly is a financial model, and how can you build one that’s both robust and flexible?
In short, a financial model is a tool that helps you forecast your future financial performance. It takes into account various inputs such as revenue, expenses, and investments to help you understand your financial situation and make informed decisions. A robust model is one that accurately reflects the financial performance of your business or personal finances, while a flexible model is one that can be easily updated and adapted to changing circumstances.
Here are some steps to help you build a robust and flexible financial model:
- Define your goals: What are you trying to accomplish with your model? Are you trying to secure funding, track your expenses, or plan for your company’s future? Understanding your goals will help you determine what type of model you need and what information you need to include.
- Gather your data: To build your model you’ll need accurate information to feed into it. This includes information on current financial situations, as well as projections for the future. Be sure to gather all the relevant data you need.
- Find out what sort of model you need: There are many different types of financial models, so it’s important to choose the right one. For example, if you’re a startup seeking funding, you may need a detailed three-statement model that includes projections for revenue, expenses, investments, and returns by producing a cash flow, balance sheet, and income statements.
- Build your model: Once you have all your data and have chosen your model, it’s time to build it! Be sure to include all the relevant information and make sure your calculations are accurate. If you don’t know how to build a model, then our team of modelling experts are on hand to help.
- Test your model: Before you start using your model, it’s important to test it. Make sure your projections are accurate and that your model can handle different scenarios.
- Update and refine: As you use your model, you may find that you need to update it or make changes. Be sure to regularly review your model and make any necessary alterations to ensure it remains robust and flexible (This is a service that we also offer here at Gridlines!).