At first glance, the Modano financial model has a lot of tabs and can appear overwhelming. Here are some usage guidelines we've put together that'll have you zipping around before you know it.
Model integrity and usage
We build financial models using the Modano financial modelling Excel add in.
While spreadsheets offer infinite flexibility, it can be easy for errors to creep in as models are used and changed, especially when there are several people involved.
Standard Ledger uses Modano to ensure that there is model integrity built right in, including error checking.
When we deliver a model, it is presented in 'locked down' version to prevent errors in totals and other values.
One of the most common 'problems' with the locked down version is that (to reduce screen clutter) rows and columns are normally shown in a collapsed version (see the “+’s on the left side or the top of the model). While this does reduce screen clutter, if you’re a hands on person and want to be able to follow through all the formulas, it can be frustrating (speaking from personal experience). While it’s tempting to want an unlocked version just to follow through formulas, having further versions runs the risk of adding to version control problems.
If you want more detail shown to be able to follow through on a regular basis, please ask and we’ll save the locked down version in an expanded form so you can see the detail you need.
Live linking to Xero
Modano provides your business with a driver-based financial model, which imports and reconciles your latest Xero data at all times, providing further integrity of the underlying data source.
The financial model has live links to Xero and is automatically rolled forward each month to facilitate rolling budget variance analysis. The same model is then used for strategic planning, cashflow management and fund raising transactions.
Finding your way around
At first glance, there are a lot of tabs in the model which can be a bit daunting initially but you’ll quickly find yourself zipping around, The main areas you’ll be using are the key input assumption tabs for Revenue, Staffing and Other Opex expenses, and you’ll see the impact of any changes you make in the Charts (our favourite) or the more detailed, numbers-based financial outputs.
Remember, we’re here to guide you so reach out with any questions.
Model updates
Each month, we do an 'EOM roll' in the model whereby we pull through the latest actuals into the model and review the latest forecasts to see if they need to be changed.
During the month we encourage you to be hands on and use (a version of) the model for various 'what ifs' to help with decision making. Common questions include:
What if revenue drops?
Can I afford to hire new people?
As your CFO, we’re interested in working with you on these questions too but it’s good and likely you’ll also be exploring these on your own so, remember:
Version control
Between us though, we need to ensure we understand which model is the latest one when we need to update the model for any structural changes, and especially for the next EOM roll.
We’ll do our best to check in with you around any changes / EOM but here are some guidelines so we (all) don’t get too confused:
- If you want to update forecasts, update the latest rolled model
The latest model will always be named something like
V2.11 2021-06
v2.11 represents the last structural model update version
2021-06 is the last EOM actuals that have been included
- It can be useful to take a copy and stick your name at the end of the filename so it’s clear you’ve made changes to the original
The model name would then be something like
V2.11 2021-06 Mary
- If you’re simply playing around for some what ifs, we suggest you either take a completely offline copy, or name it something obviously temporary like
V2.11 2021-06 TEMP
V2.11 2021-06 COPY ONLY
V2.11 2021-06 GROWTH SCENARIO
etc
End of Month (EOM)
EOM is a busy time for the finance team. We’re ensuring that Xero is up to date and making sure the CFO and team are reviewing latest actuals and expected forecasts.
Therefore, it's not desirable to make changes to model structure / logic at EOM so we typically plan to make any more structural model changes mid month. In particular, we typically 'freeze' any model structure changes in the last week of the month. Where changes in/around EOM are really required then we (all) need to be on the same page with tighter version control.
It is totally possible for you to keep updating assumptions in the latest version of last month's model as we’re coming up to EOM… we’ll always be looking to check in and confirm that we have the latest version that incorporates your latest assumptions as the version we use for the EOM roll into the new month.
Evolving the model
When we deliver the first version of the model, our aim is to ensure we’ve captured all the relevant drivers for revenue and expenses and we can see the all-important forward cash position. We want, and encourage, your increasing familiarity with the model to keep it updated with the simpler updates like staffing and expense changes.
Especially where we’re also engaged as your CFO, we’re right there alongside your business as it evolves (sometimes pretty quickly for our startups!). This can often lead to structural changes to the model and also keeping it in sync with how things are being tracked 'in real life' in Xero.
As well as changes at the business level, what typically happens is a refinement of the model outputs where you’d like to see the financials in a different way, add dashboards and bring in key driver data and metrics (e.g. SaaS metrics such as CAC and churn) so they can be included in the monthly reporting. These are great discussions, and show an evolution beyond that initial focus of 'when does my cash run out' and a more sophisticated approach to understanding and managing ALL the key numbers that matter to your business (not just the cash). Again, we look forward to continuing to layer these additional data points and financial and graphical outputs for you over time.
Where we’re engaged as your CFO, simpler changes to the model are included as part of that CFO service. For non-CFO clients and/or where there are significant model changes, these will be charged separately from the initial model build.