Auditing your financial models – the proof is in the pudding...

So… You’ve finally finished your Excel model. It looks good, there are even dashboards included and you reckon your financial model or workflow is good to go. Think again.
There is a thought lingering in your head: is the model sound? Is it sustainable? And most of all: are the results correct?
Well, can’t be that hard, can it? You just run a couple of tests and scenarios and if the numbers are adding up, we are good to go. Don’t fret over it. We’ll be right mate. Or will we???

You see, the big problem is in our own psyche: we can’t find or see our own errors. I’m not talking about a plain visible #N/A in one of the cells. I’m talking about a formula which is not right. I’m talking about a sum-total adding up all numbers in a column, but somehow missing the last three lines out of 547. I’m talking about the dreaded hard-coded number where a formula used to sit…

You can’t see your own errors, and believe me, I have yet to see an Excel model, where there is no error or inconsistency whatsoever.

And I am rather (un)happy to admit, that I am making the same mistakes myself.

I’ve been there, you build a model, you test it, you test it once, you test it twice, you test it three times and you are content and happy. Now someone else is using it and suddenly a total different scenario pops up and you realise that you must have overlooked something in the first place.

So what can we do, to find these errors? Simple: give your finished model to your collegues and  let them test it.