As part of my current business, I am often required to review Excel cost models or cashflow models built by others.  Some of these models can be monsters in size, using multiple worksheets, cross-linking between worksheet cells, and having hard wired numbers inside cell formulae.  Some of the models I have reviewed will build the entire operating cost (mining, processing, G&A), build the capital cost, and finally present the economic model… all in one!  This makes the model very complex with lots of worksheets and difficult to follow the logic.  Sometimes your gut feel says there must be formula or linkage errors in there somewhere but you just can’t find them.   In these types of models more focus is spent trying to figure out the logic than actually looking at the validity of inputs and output.  It seems that only the model developer can really work with these spreadsheets and the rest of us can just hope he or she has done everything correctly.
Over the years, I have learned that there is an art to creating a clear, concise, and auditable cashflow model (or cost model). Once in awhile you come across one that is well crafted and not an example of someone saying “look how clever I am”.
In building the models I have learned to not try to do too much in the same model, especially if several different technical people are involved in its development.   I won’t go into detail here on good practices, but you can check out the instructional presentations prepared by Peter Card at Economic Evaluations (http://economicevaluation.com.au).  He has some excellent practical recommendations that all financial modellers should consider.  It doesn’t take long to review his lessons and it’s worth the time to do it.  His recommendations can generally apply to any Excel modelling effort, whether it be costing, scheduling, or economic analysis.
My bottom line opinion is that you can and should build your spreadsheet models compatible with the way you think.  However try to keep all aspects identifiable and try to be consistent in your modelling format and methodologies on all worksheets and all your models. Not everyone thinks the same way so try to help everyone by taking the extra steps of building in some clarity.  Your client, colleagues, and reviewers will thank you.
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