Financial Modeling Fundamentals

How to design your Financial model Preparing the right schema for your financial models is the foundation to a model that gives you the information you need, when you need it. I’ve seen 100s of Financial Model’s in my career… and while they all can differ from one another… this structure can be applied to ANY business model. It all mainly comes down to: (1) Source Tabs → (2) Inputs Tabs and → (3) Output tabs ➡️ SOURCE TABS Your model often times will start with an export / connection to your a number of source data such as: → your existing P&L and Balance Sheet → your headcount details → your customer details These source tabs should be designed in a way where you don’t need to edit their format, making it easy to refresh / resync ➡️ INPUT TABS Once you have your source data, it’s now time to design your inputs. It’s common to consolidate as much as possible with your inputs into just one tab. This makes it easy for your readers to understand all the assumptions that go into your model, allowing for a centralized location where everything can be tweaked. Sometimes though, you may have too much information to fit on one tab. That’s where your other input tabs come into play, which will then all push to your centralized drivers tab ➡️ OUTPUT TABS Now that you have your source tabs… and you’ve tweaked your assumptions on your input tabs… it’s time to present your findings. The most important findings will be the output for your 3 financial statements It’s also common to divide up your output tabs between DETAILED ***********************outputs (IE, your full P&L, Balance Sheet and Cash Flows)… and SUMMARIZED outputs → Summary Tables These tables help you summarize your detailed outputs, such as a summary P&L, summary Balance Sheet, or summary Cash Flows I like to start here and analyze big movements from one period to the next before drilling into the details → Dashboards & Reporting Now comes my favorite part of a model… Your Dashboards & Reporting. This is where you woo your audience with beautiful visuals that summarize the key information 🤩 === It’s common to also include a table of contents with your models so that the readers can understand how everything is laid out, and where the edits can be made. Remember…your models are not just for yourself - they will almost always be reviewed and tweaked by outside parties. The more coherent & clear the structure of your model is, the easier it is for you to manage and nail your projections. Ready to master every other aspect of financial modeling? Starting next Tuesday, over the course of 4 workshops I will teach you everything I know about building a bulletproof financial model. Everything will be happening inside my community - The Board Room. Find more details here: https://lnkd.in/eU4b8ARA Those are my tips for how I create a financial model. Got anything to add? Let us know in the comments below 👇

I've built hundreds of financial models, and this is a simple guide to organizing them properly. Here's my 8-step layout that will keep your models clean and efficient: ~~~ 📌𝗧𝗟;𝗗𝗥: grab the guide here 👉 https://lnkd.in/eTB9X7aE ~~~ 1. 𝗠𝗮𝗽𝗽𝗶𝗻𝗴 ↪ List of entire chart of accounts ↪ Add adjacent column to group into buckets ↪ Example: Classify Salary, Bonus, Payroll Taxes, Benefits into "Labor" 2. 𝗥𝗮𝘄 𝗗𝗮𝘁𝗮 ↪ Copy/paste monthly P&L and Balance Sheet data from system ↪ I still export as CSV (that's just me) ↪ Use PowerQuery if you want 3. 𝗕𝘂𝗱𝗴𝗲𝘁 𝗦𝗰𝗵𝗲𝗱𝘂𝗹𝗲𝘀 ↪ Separate tabs/schedules for detailed forecasting ↪ Include Revenue, Headcount, Capital Projects, Known Contracts ↪ Eventually link to Three Statement Model 4. 𝗔𝗰𝘁𝘂𝗮𝗹𝘀 ↪ Consolidate Raw Data into time series format ↪ Group into same buckets from Mapping tab 5. 𝗕𝘂𝗱𝗴𝗲𝘁 ↪ Duplicate Actuals tab with 𝘧𝘰𝘳𝘦𝘤𝘢𝘴𝘵 functionality ↪ The Forecast either: - Comes from Budget Schedules - Has growth assumptions next to line items 6. 𝗙𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 𝗠𝗼𝗱𝗲𝗹 ↪ Three Statement Model consolidation ↪ Same layout as Budget & Actuals ↪ Pulls Actuals if available, else Budget (using a LATEST_ACTUALS cell) ↪ Automatic Balance Sheet and SCF updates 7. 𝗦𝘂𝗺𝗺𝗮𝗿𝗶𝗲𝘀 ↪ Pull Three Statement model into print-friendly format ↪ Build model first, summaries last ↪ Don't model and print in same place 8. 𝗔𝗱𝗺𝗶𝗻 ↪ Consolidate all possible errors ↪ Also has "Latest_Actuals" cell ↪ Most important section for error tracking I've used this exact structure to build models for deals ranging from $2M to $250M+. Feel free to adjust based on your specific needs. Hope this helps 🙂. ~~~ 👋 Hey! I'm Chris Reilly. 🟢 I can help you become the go-to Financial Modeler in only 8 hours. ⏩ https://bit.ly/FMECourses

Do not overcomplicate your cash forecast. You do not need 40 tabs and pivot tables. You need to know: → When money is coming in → When it is going out → How much you will have left That is it. Start simple. Get accurate. Make it prettier later. Clarity first. Fancy later.

What keeps your financial models clean and reliable? Let’s talk about something we all wrestle with when building a three-statement model: keeping it organized and easy to follow. Imagine presenting your work to a team or a client, and halfway through, someone asks, "Wait, where did this calculation come from?" It’s not just frustrating it can shake confidence in the model itself. In a well-structured model, the income statement, balance sheet, and cash flow statements should provide a clear picture of the company’s future, not a scavenger hunt for formulas. That’s why the best practices in modelling are all about simplicity and transparency. Here’s a great example: Instead of calculating net property, plant, and equipment (PPE) directly on the financial statements, create a supporting schedule. This schedule handles CapEx, disposals, and depreciation—leaving the financials clean and focused. The same approach applies to retained earnings, dividends, and even more complex items like a revolving line of credit (which steps in during a cash crunch) or reducing term debt. Think of these schedules as the engine room of your model. They do the heavy lifting so your financial statements can shine as the clear, forward-looking narrative they’re meant to be. 💡 Here’s a takeaway: The cleanest models aren’t just easy to follow—they also build trust. Research shows that clear communication of financial data improves decision-making by 23% (source: McKinsey & Company). When was the last time you revisited your modelling approach? If this feels like a nudge, maybe it’s time to open up that old Excel file and give it a second look. What are your go-to tricks for keeping your financial models clean and transparent? Share them below I’d love to hear!

One of the quietest blind spots in FP&A is deferred revenue. On the books, it looks like stability—cash is already collected, revenue recognition just waits its turn. But if you don’t model it carefully, deferred revenue can disguise future pressure points. I once saw a forecast that assumed growth would continue smoothly because deferred balances looked strong. The problem? Most of those contracts were annual prepaids, front-loaded. Cash had already arrived, but expenses to deliver the service stretched months ahead. When renewal season came, the team realized they were betting on conversions they hadn’t planned for. The insight here is simple: deferred revenue isn’t future cash, it’s past cash with future obligations. Treating it as a cushion creates a false sense of security. The smarter approach is to map deferred balances against delivery costs and renewal cycles. That way, finance can see when today’s collections will run dry and where the next inflows truly matter. Clarity here transforms decision-making. Instead of asking, “Do we have cash now?” teams start asking, “Will we still have it when we need it?”

Most startup financial models are beautiful lies. I’ve reviewed hundreds of early-stage models. And the pattern is clear: → CAC magically drops over time → Churn is “estimated” but never tracked → LTV isn’t calculated or worse, inflated → Headcount costs are wildly optimistic → There’s a “Misc” tab with $1.2M in it Why does this happen? Because founders treat models like investor theatre. Built to impress. Not to operate. The cost? → You raise capital with zero visibility on runway → You overhire and miss your margin targets → You make roadmap bets you can't actually afford → And worst of all? You realize too late that the business model doesn’t work Your model isn’t a pitch prop. It’s your decision engine. A good one should answer: → What happens if CAC jumps 25% next quarter? → Can we delay the next hire and still hit targets? → What’s real runway after expansion churn? If you can’t get those answers, you don’t have a model. You have a spreadsheet in a blazer. Here’s how to build one that actually works: 1/ Start with a clear purpose → What decisions should this model help you make? Hiring plan, pricing strategy, runway clarity? Be specific from day one. 2/ Ground it in real systems → Pull actuals from your CRM, accounting, and payroll. Your model is only as useful as the data it’s built on. 3/ Link your core financials → P&L, Balance Sheet, and Cash Flow should speak to each other. If they don’t, your forecast can’t be trusted. 4/ Segment revenue realistically → Break revenue down by product, customer type, or geography. Model retention, expansion, and churn by cohort — not hope. 5/ Reflect costs with accuracy → Include real team ramp times, founder comp, tech debt, and overlooked ops costs. This is where most risk hides. 6/ Run scenarios, add sensitivity → Best case, worst case, base case. Play with CAC, churn, and pricing levers. Your model should answer “what if?” 7/ Use and update it regularly → If your model isn’t revisited monthly, it’s already outdated. It should evolve with your business — not collect dust post-fundraise. Bottom line? If your model looks polished but doesn’t drive decisions.. Rebuild it. Your business depends on it. PS: Curious, what’s the one metric you check first when you open your model? ——— Need help making the numbers make sense? I’m Mariya. Fractional CFO for SaaS startups. I help founders get clear on what the numbers are really saying. 📩 DM me if your model doesn’t match your reality.

A breakeven SaaS company growing at 33% generates the same value for shareholders as one growing at 50% with a 1.1 burn ratio. Given the current cost of capital, should CEOs press the accelerator, drive growth, and raise another round? Or should they pull back to break even with more moderate growth and forgo additional dilution? I’ve built a financial model to answer these questions. (link below) It looks at the outcomes for existing shareholders based on the following four assumptions: burn ratio, growth rate, cost of capital, and exit multiples. The model provides insight into this fundamental question: based on how efficient your business is at turning cash into ARR, and given the dilution needed to support that growth, should you jump on the accelerator or not? Alternatively, how much of a slowdown can you absorb in transitioning to breakeven without destroying value? The assumptions graphed compare a 50% growth business with a 1.1 burn ratio (defined below) to a 33% growth business with a .2 burn ratio. The higher growth business raises capital at five times ARR and exits at six times ARR, and the efficient business raises money at four times ARR and exits at five times. (These are slightly different assumptions than in the post's first sentence.) You can adjust the model as you see fit. Fundamentally, the burn ratio in the model drives the need for capital, which dilutes the current shareholders. In this example, the current shareholders clear $229 million in the High Growth scenario vs. $146 million in the Efficient scenario. That’s the math. The model, however, does not include a risk adjustment. The High Growth plan requires $127 million to be raised in five rounds over ten years. A lot can go wrong with that plan, including droughts in the VC market like we see today. In addition, the existing shareholders' ownership in the High Growth scenario is only 33% at exit. That might be fine, but founders need to consider the lack of control it implies. Another question you can answer is: what growth do I need to maintain if I scale back to break even? In the example referenced earlier, a 50% growth business with a 1.1 burn ratio creates the same value as a 33% growth business at breakeven. From an operator’s perspective, the model quantifies the valuation impact of capital efficiency, which includes your CAC ratio, overhead spending, and gross margins –- all of which impact the burn ratio. At the end of the day, this is just a model, and it’s infinitely easier to copy cells ten columns to the right than it is to build a software company. Founders and CEOs will need to place this analysis in the context of the many challenges that face software business, including the size of the opportunity and your own skill set, ambition, risk tolerance, and timeline. (Burn ratio is defined as Cash Consumed/New ARR. For this model, profit and loss are equivalent to cash flow.)

Still spending 40+ hours building financial models? Here's what successful founders do instead... Last week, a founder called me in panic: "Logan, I've spent 80 hours in Excel, have 15 different versions of my model, and investors still aren't convinced..." She's not alone. Most founders waste weeks building complex models that investors hate. After helping 1500+ founders build investor-ready models, here's what successful ones do differently 👇 1. Automate the Basics • Revenue projections • Expense tracking • Cash flow analysis • Unit economics Manual calculations kill accuracy (and your time). 2. Focus on Assumptions • Market size validation • Growth rate justification • Cost structure analysis • Revenue drivers Investors care more about your logic than your formulas. 3. Build for Scale • Flexible scenarios • Easy updates • Clear documentation • Stakeholder-ready views Your model should grow with your business. 4. Prioritize Clarity • Simple interface • Clear assumptions • Key metrics highlighted • Easy navigation Complex models scream "amateur" to investors. 5. Enable Quick Updates • Real-time data sync • Dynamic forecasting • Market adjustments • Performance tracking Static models die fast. Want to build an investor-ready model in days, not weeks? Let's have a quick chat about your financial strategy: https://dub.sh/oetMBFT

How Finance Managers get a seat at the decision table Here are 5 ways to get you there (from basic to advanced) 👇 #1 Interpret historical performance #2 Run sensitivity analysis #3 Conduct a competitive analysis #4 Create a SWOT analysis #5 Lead a scenario planning process Let’s dive in. Here is the problem: You are in a corporate Finance role and part of your job is to “partner with the business” and “influence decision making”. You realized quickly that that’s easier said than done. Your cross-functional business partners need to let you know they are about to make a big decision and share relevant information with you. Here are five ways to prove them you can add value: #1 Historicals A common bias from ignoring context is called the “hockey stick plan”. Estimates can be too optimistic if they aren’t compared to past performance. But don’t simply send your business partners a big spreadsheet with the P&L. Only show relevant metrics and include those from balance sheet and cash flow as well. #2 Sensitivities Help people understand which drivers matter more than others. Build a simple sensitivity model in Excel, for example for revenue. Then you can make statements like “adding a new customer gives us on average $0.5m in annual revenue”. Or “each additional percentage point in inflation means that we need to generate $1.0m in additional revenue to keep the same level of profitability”. #3 Competitive analysis Most companies have to deal with consumers switching between brands on a regular basis. So, knowing what competitors are up to matters. Make sure not to limit it to the financials. Listen to the quarterly analyst calls. That allows you to include insights like new product launches and other shifts in strategy that may impact your business. #4 SWOT It stands for Strengths, Weaknesses, Opportunities, and Threats. It sounds simple, but can be tough to put together. But you’ll see quickly that taking a step back and looking at the bigger picture is something few people do, so your findings will matter. #5 Scenario Planning Look at internal and external business drivers. Then flex them to arrive at worst-case and best-case scenarios. If you combine those that will likely be linked (for example inflation and a recession), you’ll create scenarios that inform decisions. But the real value comes from concrete action plans. If you prepare what you will do when the worst (or best) comes to pass, you’ll likely have a much better response than when you make it up on the spot. 👉 In sum, to get a seat at the decision table, you need to prove you can do more than cut budgets and update forecasts. A great way to do it is by flexing your analysis muscle. -- If you’d like to learn more from me: Subscribe to my weekly newsletter! Join 10,000+ Finance & Accounting professionals and get: ➢ 3 FP&A insights from me ➢ 2 quotes from others, and ➢ 1 infographic in your inbox ...every Tuesday. 👉 Subscribe at (free): https://lnkd.in/dredP3d5