5 Excel Modeling Principles The most important Excel modeling design do’s and don’ts you have to know

Are you spending lots of time and effort

on developing Excel models?

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Then make sure you know the…

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most important Excel modeling design principles 5  

… and actually APPLY them!

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Don’t hard code. 1  

Never type numbers as part of formulas directly into cells as it will be hard for you to update the model if need be. Even more so, the model will be error-prone and next to impossible for others to reconcile.

Always refer to one source cell.

2  

Especially when running through different scenarios, you will want to see the effect of changing key parameters. Using references to one source cell, the rest of the model should update itself automatically.

Rigorously apply formatting standards.

3  

While most relevant for client-ready deliverables, make it a habit to be consistent in how you format your models. Just like any other work document you create, an Excel model should be formatted consistently.

Separate data input and output using different sheets.

4  

Always have at least two sheets in each model, namely input and output. The first captures the data you have received or collated, while the second performs calculations and displays some results.

Do not play around with source data.

5  

Don’t change the structure by adding additional columns or subtotals. If you need to rework the data to make it useful for your analysis, arrange this conversion on a separate sheet. Why? Just imagine you receive an updated data set from your client…

Do not play around with source data. 5

Separate data input and output. 4

Rigorously apply formatting standards. 3

Don’t hard code. 1

Always refer to one source cell. 2

Do’s & Don’ts of Excel Modeling Design:

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CONSULTANT & AUTHOR

MORITZ DRESSEL

Moritz Dressel is the author of The Aspiring Advisor - Strategies and Tools for a Successful Consulting Career.

He can be reached via Twitter @MoritzDressel or at his blog www.MoritzDressel.com

He is also a management consultant specializing in post-merger integration, joint ventures and strategic alliances.