How do I use the Modano financial model?

At first glance, the Modano financial model has a lot of tabs and can appear overwhelming. Here's some usage guidelines we've put together that'll have you zipping arounf 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 multiple people involved.

Standard Ledger uses Modano to ensure that there is model integrity built right in, with error checking etc.

When we deliver a model it is presented in “locked down” version to prevent errors in totals etc being made.

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 reducing screen clutter if you’re a hands on person and want to be able to follow through all the formulas this can be frustrating (speaking from personal experience).  While it’s tempting therefore to want to have an unlocked version just to follow through formula’s, 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 with you to guide you so reach out with any questions you have.

Model updates

Each month we will 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 if’s” 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 both 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 actually 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’s 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 name 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 too 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 if’s, we suggest that 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, making sure the CFO and the team are reviewing latest actuals and expected forecasts.

Making changes to model structure / logic at EOM is not desirable, therefore, 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 tight-er version control.

It is totally possible for you to keep updating assumptions etc in the latest version of last months 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

Our aim when we deliver the first version of the model 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 simple-r 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 also 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 (eg SaaS metrics such as CAC, Churn etc) 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 layering in these additional data points and financial and graphical outputs for you over time.

Where we’re engaged as your CFO, simple-r 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.