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Financial modelling course participants often sign up for formal training at the following points: 

• As part of a finance-focused induction programme; 
• 2+ years’ experience, when the role demands a better approach to building spreadsheet models; 
• In between roles, as a means of preparing for a new role (or to persuade a new employer that you are right for a role); 
• 5+ years’ experience, when the role demands that you are adept at interrogating other people’s financial models; and
• Team-based (mixed experience), to raise the skill levels of colleagues who need to collaborate better with each other 

For the best immediate benefit, it’s good to have some experience of building your own Excel spreadsheets and therefore some knowledge of the pain points. Then formal training is likely to be more effective since it is offering solutions to genuine problems that you have encountered.

There are plenty of financial modellers who would describe themselves as self-taught. While it’s possible to solve financial modelling problems on your own initiative, there is a significant risk of: 

• Losing sight of the bigger picture while solving specific problems 
• Inventing a system that works for you but is difficult for others to understand 
• Reinventing the wheel; or 
• Inventing a bad wheel 

Three classic characteristics of models built with poor design decisions are: 

• Complex formulas (a function of both formula length and functions used); 
• Remote cell references included in formulas – making the source difficult to trace and the model difficult to navigate; and 
• Links to links (“daisy chains”) 

A better approach is to work from a book. But financial modelling books tend to be either over– or under-ambitious in their aims. Plus working from an older edition may mean that latest good and best practices are missed. 

A self-taught financial modeller who does not make use of generally accepted good practice is easy for others to spot. It can put them at a disadvantage.

It’s important to make the distinction between financial modelling (a set of skills and knowledge designed to support financial forecasting and decision-making) and Excel (the software platform that many financial modellers use). 

A rudimentary knowledge of Excel (the menu ribbon, the grid and its cell references, the use of the $ symbol in fixing row and column references, and the SUM function) is easily sufficient before beginning a financial modelling course. 

It’s also important to note that an advanced financial modelling course will not necessarily teach you advanced Excel. The challenge in financial modelling is to use Excel at its simplest to support complex modelling assignments.

Blog: 12 commonly-used Excel functions every financial modeller should know

There’s no question that a working knowledge of the following topics will make things easier:

• Profit and loss / income statement (accruals accounting) vs cash flow statement (cash-based accounting), both being a measure of financial performance over time
• Balance sheet as a statement of position at a single date
• Core investment appraisal techniques: payback, net present value, internal rate of return

But the absence of such knowledge is not a serious barrier to progress, since a well-structured financial model will have at its heart a set of 3 dynamic financial statements, meaning that it is possible to learn accounting from financial modelling (and not financial modelling from accounting).

There’s no guarantee that a professional accountant must by necessity be a good financial modeller; nor do good financial modellers necessarily make good professional accountants.

In what Tom Grossman describes as “split-role modelling”, it’s worth identifying two core competence areas:

1. Spreadsheet engineering, focused on how to manipulate Excel to achieve best results; and
2. Conceptual modelling, focused on being able to describe to others in detail what you want to see from a spreadsheet engineer

Everyone joining a financial modelling course starts by thinking about the spreadsheet engineering. But the real lessons are to be learned from being a good conceptual modeller.

Other competence areas include:

• Proficiency in Excel
• Model design skills
• Model construction skills
• Model review skills
• Presentation of results

The key financial modelling learning methods include: 

• Teach yourself: included for completeness only, noting that plenty of financial modellers avoid formal training interventions altogether. The risk of learning being acquired inefficiently and with a sub-optimal outcome is high.
• Learn from a book: requires huge amounts of self-discipline.
• Learn from video-based online learning: requires self-discipline although video can be more engaging than a book. It is accompanied by a learning platform allowing downloads of examples, a support forum etc.
• Learn from live online tutorials: an instructor takes responsibility for scheduling and delivering formal training sessions – albeit remotely. Scope for bite-sized learning sessions spread over a number of days, allowing time for self-reflection and independent assignments. 
• Learn in the classroom: an intensive, immersive experience which can be both transformative and exhausting.
• Learn by teaching: either by running sessions for your more junior colleagues or by becoming an instructor for a training organisation. 

Learning to build financial models involves developing knowledge in layers and then making connections between those layers. It’s easy to get concerned that you might be slowest of the pack and are falling behind when it is simply a case that you learn quite differently from your colleagues. 

A good financial modelling course will manage differentiated learning actively: 

• More than one instructor (with a second instructor focused on helping individual participants and providing feedback to the lead instructor) 
• Wide variety of teaching delivery methods 
• Plenty of time in the course for questions and discussion
• Peer feedback and review 
• Formal and informal assignments (to help a participant answer the question: “Am I ready to move on to the next stage?”); and 
• Breaks between formal teaching sessions to encourage self-reflection 

And if you have the opposite problem – you’re waiting for your colleagues to catch up with you – a good financial modelling course will: 

• Use the case study to point you towards additional work; and
• Encourage you to help your neighbours (a form of peer review / encouragement) 

The intensive nature of course content means that you may simply want to rest after a day’s study. 

Formal homework tends to be light – although there’s an implicit assumption that if you are fired up by your new skills then you will want to practise them. If you are really keen then you will want to attempt to re-model at home what you have completed that day in class. 

Being set an assignment during the course is valuable since this encourages self-discovery. It’s a real test as to how much you have absorbed. And if your instructor sets the assignment with a deadline and immediate feedback, the effect on learning can be transformational. 

Video-based learning is a good way of supporting you in topics where you missed key details. Seeing a video that covers the same learning you encountered in class is very reassuring. Look for video-based learning that: 

• Is included in classroom-based delivery methods; and 

• Has models available to download 

It is common to record and make available online tutorials as part of live remote learning. These recordings have the added advantage of covering a live event that you attended. 

A good financial modeller is a fluent financial modeller. Fluency means that mechanical tasks are at your fingertips so you can build a model while: 

• Having a conversation; or 
• Watching television 

The more serious point is that by committing so much to muscle memory (through repeated practice of a few routines), your brain is freed up to consider the tougher aspects of modelling: the 20% of an assignment that is not boilerplate. 

You will know you’re on a path to success when you focus the majority of your effort on the specifics of a modelling assignment that make it difficult (knowing that you already have a tried-and-tested method to deal with everything else). For example, there is no need to design a scenario manager from scratch since there are plenty of models that have scenario managers. If they have been built using a financial modelling standard, then it is a trivial piece of work to transplant the model structure from one model to another. 

If you can model something then you understand it. That’s because it’s difficult to fudge a result when working transparently with inputs, calculations and results. Because your model logic is on display for all to see, by adopting a specific approach you have – by implication – rejected all others. 

So if you are studying for financial qualifications – Chartered Financial Analyst (“CFA”) for example – you can use your knowledge of financial modelling to confirm your understanding of financial topics. You might want to prepare simple models to calculate:

• Financial ratios
• Valuation techniques: net assets; dividend valuation model; PE ratios
• Net present value / internal rate of return
• Cost of equity: dividend yield + growth
• Cost of equity: Capital Asset Pricing Model (“CAPM”)
• Yield on debt / corporate bonds
• Weighted Average Cost of Capital (“WACC”)
• Modigliani & Miller: theories of capital structure
• Value creation: shareholder value analysis
• Black Scholes Option Pricing

And the relationship between practical financial modelling and financial theory works both ways. For example, if you are assessing different financing structures for a company and deciding on an optimal way forward, it can be helpful to support that way forward with reference to the relevant financial theory (Modigliani & Miller springs to mind).

Ebook: Essential Model Optimisation