Building actual data into a financial model

By Nick Crawley on July 15 2009

Updating a typical project finance model for real life information generally causes a lot frustration on the part of modellers,  bankers, sponsors and auditors alike. Click here to see a free tutorial on how to do it properly.

Whats the problem?

It seems that post financial close the model gets dragged through construction, even into operations, the real life cash flows get typed literally over the existing formula. The implications of this are not be underestimated and range across

• invalidation of the Model Audit Opinion
• interference of how the scenarios work
• impacting the logical integrity of the model

How are models usually updated?

…Badly! Ask any agent bank in a project finance transaction. There are several ways to solve the problem including

• typing over the formula (crazy but most common
• a full rebuild post financial close with more detailed input layout so they could be updated over time
• a more cost efficient consideration is to build in “actuals functionality” into the financial model once the transaction has stabilised.

This is not difficult to achieve and does not add any significant complexity to the model. Click here to see a free tutorial on how to do it properly.

Give it a go and always if it works for you, great tell others, if not let us know so we can help you out.

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