Avoiding Excel Hell – Developing Better Spreadsheet Models

There are various ways you can suffer in spreadsheet hell, as these real-life examples illustrate.

With Excel now the dominant spreadsheet system, we’ve already looked at how to escape Excel Hell in the articles on these subjects where understanding the limitations of Excel means there are better alternatives:

• For business processes
• For reporting
• For planning and forecasting

But what about for financial modelling? For this, Excel has a real and valid role. But how can models be developed that give real and valid answers?

Best practice has been developed, and there are three leading initiatives. These overlap, but between them offer a sensible practical approach:

(1) European Spreadsheet Risks Interest Group (EuSpRIG)

The advice from IBM and ICAEW is still relevant and useful, although dating back to 1999. This approaches spreadsheets as for any software development, recommending that :

• Should be easy to use, through good design
• Focused on the important issues
• Easy to understand
• Reliable, through being tested

Testing is key, especially as a spreadsheet model evolves and develops. Getting someone independent to test it with a fresh eye is far better than just trying to do it yourself

Here are some tips on how to minimise the risk of errors in a spreadsheet model. and other tips for best practice

(2) The FAST Methodology:

The idea here is to make a spreadsheet model “Flexible, Accurate, Structured and Transparent".

Appendix C of the FAST modeling standard summarises all the “rules” they suggest: for

• Workbook Design, being a collection of worksheets
• Worksheet Design
• Line Items, including use of formulae
• Functions and Formatting

(3) Spreadsheet Standards Review Board

The SSRB's Standards cover each of 16 aspects:

1. General Concepts
2. Workbook Structure
3. Sheet Structure
4. Formats & Styles
5. Assumption Entry Interfaces
6. Sensitivity Analysis
7. Outputs & Presentations
8. Calculation Formulae
9. Naming Principles
10. Time Series Analysis
11. Error Checks
12. Printing & Viewing
13. Multiple Workbooks
14. Security & Protection
15. Visual Basic Programming
16. Miscellaneous

So if you are keen to avoid Excel Hell with your financial models, these standards and tips will certainly help!

If you require any further advice or assistance, then do contact us.

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