This article is written by Myles Arnott from Excel Audit
This article provides a high level overview of Best Practice Modeling and highlights five simple Best Practice Modeling concepts to put in place today. In next 2 parts we will talk about implementing some of these ideas.
Why is a standardized approach to Excel spreadsheet modeling important?
Excel spreadsheets are the most widely used business tool with over 500 million users worldwide. Spreadsheets are used within all aspects of businesses from simple day-to-day tasks to being a critical element within complex business processes such as business planning and regulatory reporting.
In the absence of a generally accepted and widely applied standard, Excel developers build models according to their own tastes. This can result in:
- spreadsheets being built in an inconsistent and sometimes haphazard way;
- frustration and confusion as model developers struggle with spreadsheets developed by somebody else;
- increased complexity and risk; and
- reduced efficiency.
What are the benefits of implementing a best practice modeling approach?
- Accuracy: Spreadsheets are less prone to errors.
- Consistency: Spreadsheets have a consistent structure and look, making sharing easier.
- Clarity: Spreadsheets are clear and structured, reading like a book, navigating like a website. This makes them easier to share and audit.
- Efficiency: Spreadsheets are easier to use and share, saving time at key points in critical processes.
- Flexibility:Spreadsheets are easily changed and extended without the need for a complete re-work.
Five changes to make to your Excel spreadsheet development today
Businesses are often put off the idea of implementing a best practice standard as they see it as very time consuming and an unnecessary level of bureaucracy. I have therefore picked five simple changes that you can make to your Excel spreadsheet modeling right now.
Change 1: Apply a modeling life cycle
Considering the five stages of a model’s life cycle shown below formalizes the process of developing spreadsheets, be it for yourself or another user:
Specify: Document the functionality and outputs required by the user(s)
Design: On paper map out the structure and data flows of the model
Build: Build the spreadsheet to best standards
Test: Testing is a vital step to identify and resolve errors
Use: Model is issued for use
Change 2: Give your spreadsheets structure
A well-structured spreadsheet is more transparent and is therefore much easier to use, test and audit. Separate your spreadsheets into the three key types shown below:
Change 3: Make cell content and cell purpose visually identifiable at all times
The content and purpose of every cell should be easily identifiable to the user at all times. In its simplest form you should distinguish between the following two cell types:
More on this: Use cell styles in Excel
In the final part of this two part series I will share some simple macros to add to your Ribbon (or tool-bars in Excel 2003) that make this really simple to put in place.
Change 4: Use consistent formulas
When more than one adjacent cell contains a similar type of output the formulas within the cells should be designed to be consistent. In essence this means that you should be able to copy a cell down or across the relevant range without needing to make changes to the underlying formulas.
This greatly reduces the risk of error, speeds up the development process and makes the workings area of the spreadsheet more transparent and therefore easier to audit.
Related: Structuring your financial models – best practices
Change 5: Build error checks into your Excel spreadsheets
When designing and subsequently building the spreadsheet you should be aware of the key checks that should be in place to assure the quality and accuracy of the model outputs. Building in error checks during the build process ensures that key checks are made and most importantly that any issues are clearly flagged to users.
Build error checks for each critical calculation and then communicate all errors through a dedicated error summary page.
Conclusion
Hopefully this article has given you a useful overview of the need for and benefits of implementing a Best Practice modeling Standard. Whilst the article has only touched the surface of Best Practice modeling, I hope that you will find the five simple changes easy to implement and that you will find them beneficial.
Some useful links:
- 12 Rules for making better Excel models + 10 rules for making better workbooks
- Introduction to Financial Modeling in Excel – 6 part tutorial
- Introduction to Spreadsheet Risk Management
- EuSpRIG – The European Spreadsheet Risk Interest Group
- Best Practice Spreadsheet modeling Standard from the Spreadsheet Standards Review Board
- Spreadsheet Safe – Certified Best Practice modeling training
In the next part of this series I will show you how to create some simple macros to automate best practice cell formatting (change 3).
Thanks to Myles
Many thanks to Myles for compiling all the tips & sharing this with us. If you have enjoyed this article, please say thanks to Myles. You can also reach him at Excel Audit or his linkedin profile.
24 Responses
I’d suggest simply using the subtotal function and filtering the data using the Win/Loss column. You get the same results and the formula is more comprehensible.
@John
That is one option.
There are times however when you want to see the whole data table or a filtered subset and still want to produce summary reports against an unfiltered field.
Is there a particular reason why you are using a comma and the unary (–) operator for the second array in the SUMPRODUCT formula? It seems to work the same if you were to string the arrays together using the asterisk (*). The advantage is that SUMPRODUCT treats the entire string of arrays as a single array.
@Mathew
Your correct, There is no difference.
I thought it may have been easier to explain this method.
Is there a way to do this on a large set of data? As in ~100,000 rows? When I try I get an error because the formula becomes too long. It says the max length of a formula is 8,192 characters. Excel 2010.
How do I incorporate a specific text within a cell for the second array. For instance, – -(C7:C13=”Apple”)
when I chose a specific text the formula does not work.
@RB
I am not sure what is the issue as if I use the sample data in the post the following work fine
Count:
=SUMPRODUCT(SUBTOTAL(3,OFFSET(C7:C13,ROW(C7:C13)-MIN(ROW(C7:C13)),,1)), –(C7:C13=”L”))
Sum:
=SUMPRODUCT(SUBTOTAL(3,OFFSET(C7:C13,ROW(C7:C13)-MIN(ROW(C7:C13)),,1)),(C7:C13=”L”)*(D7:D13))
You may want to check that there are no leading or trailing spaces in your list of Apples
I should have given a better explanation. Heres my situation. I have a column with cells filled with names like Column 1, Column 2, Pier 1, Pier 2, etc. If the cell just contained Pier and searched for that it works. But because it has other characters in the cell its not recognizing the pier. So how can I extract specific characters of a string of text in this formula?
Hopefully this was a better explanation
Hello-
This formula works pretty well for me except that it slow down excel and prevents some of my macros from working. I was wondering if there was a way to program this in VBA so that excel isn’t always trying to recalculate it. I would like to use a push of a button to get it to run then paste in a cell.
Thanks!
I am trying to sum filtered data in a column, but would want to ignore the negative values in the column. How to go about doing this?
@Akshay
Why not just add a filter to that column to only show the values greater than zero?
The negative values are required for reporting purposes, but their effect on the total is distorting the required output. Please advise.
@Akshay
I’d suggest making a post in the Chandoo.org Forums
http://forum.chandoo.org/
Attach a sample file to simplify the task
I have this working for counting and summing, however, I have a list and for the second array, I need a criteria. That is, I’m looking for b13:b200=”01.??.??” or =left((a1,2) or something like that. These types of criteria matches do not appear to work as I get a blank as a result.
Thanks!
@Bob
As your formula b13:b200=”01.??.??” looks like you are trying to check the first day of the month of the range
What about trying Day(B13:B200)=1
Hai Experts,
i understood this formula well and working fine in MS Excel 2013
but when the same am trying to place in google Spreadsheet it shows error as
“SUMPRODUCT has mismatched range sizes. Expected row count: 1. column count: 1. Actual row count: 2014, column count: 1.” and as a result #VALUE! Appears in cell.
Can anyone please help me how would i get it done in Google Spread sheet
or is there any other formula as a substitute for this.
Thank you very much.
thanks for providing this.. but why does excel keeps on prompting Circular referencing in cell D3?
@Vivek
I don’t know
I just downloaded the file and it is working fine and not showing that error
Goto the Formulas, Calculation Options Tab and check that Calculation is set to Automatic
What version of Excel and Windows are you using ?
I know that this forum is for MS Excel, but I am trying to help someone who is working in Google Sheets. The below formula works in Excel but Google Sheets returns:
“SUMPRODUCT has mismatched range sizes. Expected row count: 1. column count: 1. Actual row count: 39000, column count: 1.” and as a result #VALUE! Appears in cell.
This is the same problem asked by Srichirin above. Does anyone know if there is a formula for Google Sheets that will replicate what MS Excel does?
=SUMPRODUCT(SUBTOTAL(3,OFFSET($C$6:$C$39500,ROW($C$6:$C$39500)-MIN(ROW($C$6:$C$39500)),,1)),- -($C$6:$C$39500=H1),($D$6:$D$39500))
Trying to find a SUMPRODUCT formula that counts the word Closed by date for the last 7 days in a filtered list.
=COUNTIF(M:M,”>”&TODAY()-7) works ok for unfiltered count Column M contains Closure dates (blank if open) and Column L is Status Open or Closed
@ Terry
Please ask the question at the Chandoo.org Forums
https://chandoo.org/forum/
Please attach a sample file to ensure a quicker more accurate answer
I used this formula and worked like a charm! But, now I’ve been requested to use it but adding not one but two criteria in the same formula. For instance the sum I was doing added negative and positive numbers. I’ve been asked to use the exact same formula but adding that only positive numbers were considered… any idea on how to do this?
How exactly do you do sum filtered cells when two criteria are need not just one?
Thank you so much brother literally I have been struggling since morning to get the sum of the filtered category, however, after reading your blog attentively i got my solution, so thanks a lot once again.