Ever opened an Excel sheet and felt completely lost? Rows, columns, formulas flying everywhere, and you’re just staring at it thinking, “Where do I even begin?” That’s exactly how most people feel when they first hear about financial modelling using Excel. It sounds fancy, like something investment bankers whisper in meeting rooms, but when you actually sit down to do it, the confusion hits harder than a Monday morning.
So let’s keep it simple, no fancy words, consider this your fast-pass to Excel modelling: simple, practical, and built for the real world.
Start With Structure
The most common mistake beginners make? Dumping everything into one sheet. Numbers, assumptions, calculations, all in the same place. The result? A tangled mess where one wrong delete can ruin the entire model.
The fix is simple: separate your inputs, calculations, and outputs. Keep assumptions in one tab, calculations in another, and results (like profit, revenue projections, or cash flows) in a neat summary sheet. Not only does this make your model audit-friendly, but it also saves you from endless “Wait, where did that number come from?” moments.
Write Down Your Assumptions
Here’s the thing about assumptions: everyone forgets them later. You may think you’ll remember why you set sales growth at 15% but three months down the line, you won’t. That’s why pros always document assumptions inside the model itself.
You can add a notes tab, use comments, or highlight cells with clear labels. The idea is simple: transparency. Because a model that can’t be understood by someone else (or even you, in the future) is not a model. It’s just a confusing Excel file.
Version Control: Your Safety Net
We’ve all been there, you update a model, save over the old file, and suddenly realise you’ve broken something. No going back. Painful.
That’s why insiders swear by version control. Save files with clear names like “Model_v1”, “Model_v2_after_scenario”, and so on. This way, you can always track changes, recover older versions, and understand how your thinking has evolved. It may sound like extra work, but it’s actually a lifesaver.
The Modern Excel Toolbox
Those days are gone when financial modelling meant just VLOOKUP and SUM. If you want to be efficient in 2025, you’ve got to embrace Excel’s modern features.
- Dynamic Arrays: They make your models less delicate and easier to expand.
- INDEX-MATCH combos: Smarter than VLOOKUP, and less prone to errors.
- Scenario Tools: “What-if analysis” and data tables can instantly show how changing one assumption (say, cost of raw materials) impacts the whole business.
Learning these tools and investing time in mastering them will directly pay off when your models become sharper, faster, and more reliable.
Scenario and Sensitivity Analysis
Here’s where models get interesting. Don’t stop at building a “base case” model. Push further. Create multiple scenarios: optimistic, pessimistic, and realistic. Add dropdowns or separate sheets so anyone reviewing can see how revenues, costs, and profits shift under different conditions.
And don’t shy away from stress-testing. What happens if revenue drops by 20%? Or if interest rates climb unexpectedly? In real life, numbers rarely follow perfect assumptions. Stakeholders tend to trust models that can handle stress and still give clear, reliable results.
The Future with Excel
Excel isn’t the same old spreadsheet anymore—it’s getting smarter every year. New features like dynamic arrays make handling big chunks of data less painful. XLOOKUP has already taken over from the clunky VLOOKUP, giving cleaner results. And with lambda functions, you can build your own mini-formulas without diving into coding.
Power Query also keeps improving, making data clean-up faster and less boring. Plus, with better real-time collaboration, working on the same file with your team feels smooth, not chaotic.
The key takeaway? Don’t try to master everything at once. Start with the basics, and slowly add these new tools to your workflow as your models and your confidence grow.
Financial modelling using Excel is about making smarter decisions, and that’s where Learn to Earn truly matters. Building these skills makes you more confident and valuable in any career with numbers.
Wrapping Up
Financial modelling isn’t rocket science, it’s simply about giving numbers a voice. Start simple, note your assumptions, test scenarios, and keep learning from those who’ve done it before.
For students, programs like The WallStreet School’s Financial Modelling and Valuations Course blend theory with practice, so real-world Excel never feels overwhelming.
At the end of the day, financial modelling using Excel isn’t about pretty sheets, it’s about smart decisions.
FAQs:-
1. Can you use Excel for financial modelling?
Ans. Yes, Excel is perfect for financial modelling. It’s flexible, simple to use, and great for calculations, scenarios, and reports.
2. Is Python better than Excel for financial modelling?
Ans. Python is powerful for large data and automation, but Excel wins for simplicity, quick setup, and easy sharing with others.
3. How to do modelling in Excel?
Ans. Keep inputs, calculations, and outputs separate. Add assumptions, use formulas, test different scenarios, and show results clearly and simply.
4. What is Excel modelling?
Ans. Excel modelling is using spreadsheets to predict performance, study data, and guide smarter business or financial decisions.
5. What is the usage of Excel for financial modelling?
Ans. It’s used to forecast revenue, costs, and cash flow, test scenarios, do valuations, and guide everyday financial planning.
