Advice for new modelers

Extract of a Recorded Interview in November 2020 with Haydn Palliser and Joseph Lau

Overview

Two pieces of advice for financial modelers from World Champion Financial Modeler Joseph Lau

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 Video 

Video Transcript 

Joseph:

– I think the first thing for an analyst would be assume that you need to explain everything you write or everything you present to someone who is not an Excel modeler. Very often we have new analysts that will come in and someone asks them why, and they’ll give an Excel answer. Like, “This formula is to link this. That formula links to this formula.” And most people in the banks wouldn’t be interested in that. So they sort of need to explain it. And it’s also a very good error check. If you find that you have to explain all your sensitivity results to someone, then by definition, you will check whether they’re sensible, whether it makes sense that interest is that component of your debt service, so if you raise interest rate, you start with roughly the right proportion, that should move the ratios a certain way. And you go through all that mental checks rather than just treating some model as a black box and spit out some results. So I think that that is really important. The second thing is what I said before, chase down every little discrepancy that you find. I mean, don’t feel that it is small enough, it is good enough. Those would be my two.

Haydn:

I love it. I like the first one, particularly, it’s a good way you phrased it. I’m definitely stealing that.

 

 

Joseph is a Director and Co-Founder of Spreadsheet Advantage and Director, Project Finance Modeling Commonwealth Bank in Sydney, Australia. To learn more click here for his Linkedin profile.

Spreadsheet Advantage is an Excel add-in designed to help Excel users and developers increase productivity. Users can align different versions of a spreadsheet and compare them, analyze the logic flow of a spreadsheet, and produce a map of each worksheet.

At Commonwealth Bank Joseph coaches and manages a team of modelers that undertake analytical work for complex Project Finance transactions, primarily for deal structuring and internal bank credit approval.

 

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Financial modeling, transaction execution, and project finance training for finance professionals, governments, students, and non-profits.