Minimize Spreadsheet Risk – Defining Inputs and Calculation Formula
Once all the expected results of a financial model have been clearly specified and agreed with all financial modeling team members, users and the eventual audience of the financial model results, defining the required inputs for the financial model and the calculation formula used to arrive at the financial model results should be a straight forward exercise.
Look at the illustration to see how the inputs and calculation formula for an illustrative financial model can be defined and mapped in a straight-forward manner.
By taking a few seconds to follow these simple steps and ensuring that you document them in your financial model documentation and spreadsheet map, you will be on your way to minimize spreadsheet risks and errors, making your financial model more robust and credible.
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What i would like to add, model should be designed in a linear flow i.e. left to right and top to bottom approach.
Inputs—–Calculation—–Outputs