FAST Modelling – What’s it all about and why you should adopt it.
CFO.University Note: We are happy to add Giles Male, Co-founder at Full Stack Modeller, and his skills and enthusiasm for modelling to our professional development platform. In his first piece he outlines a modelling framework finance leaders should be familiar with.
FAST Modelling – What’s it all about
For those of you unfortunate enough to have been within earshot when I have started to talk enthusiastically about my spreadsheet work (we’re a rare breed I know…), you may be familiar with the phrase “FAST modelling”, “FAST standard”, or something similar.
“Everything I do is based on FAST principles” – is something I find myself saying to clients and colleagues repeatedly. Does this mean I’m tapping away at my keyboard at breakneck speed? Well, sometimes I suppose I am, but this is not the FAST I’m referring to.
FAST is a financial modelling standard which promotes a set of modelling (or spreadsheet design) principles. Essentially it is the way we go about building spreadsheets – with a particular focus on modelling. The FAST Standard itself is currently a 72 page document with a long list of individual modelling principles. At the heart of the Standard are the four key characteristics our models should exhibit if we are following the FAST methodology:
Flexible: You should be able to quickly change key drivers and assumptions and know that the model’s integrity will remain intact.
Appropriate: The level of accuracy and complexity of a model should be considered. Being as precise as possible is not always the best route to go down.
Structured: Model layout across the workbook and within individual worksheets should be consistent and well ordered. Timelines in particular should be standardised in terms of their position if they are built across multiple worksheets.
Transparent: Simplicity and clarity are important. Avoid complex formulae wherever possible, break calculations down into separate steps, and structure your worksheets in a way that makes it easy for other users to follow your logic.
The Standard itself was created by a group of very experienced modellers who had a desire to see all spreadsheet users go about their work in the same simple, logical and structured way.
Huge steps forward have been made since the Standard was first published, but we still need more people to buy into this idea of a standardised approach. With enough momentum, we could find ourselves in a world where any spreadsheet user can pick up anyone else’s model and start to use and update it quickly with a high degree of confidence that its outputs can be relied upon and are free from material logical error. By having the spreadsheet users at their organizations adopt FAST standards, CFOs can realize these benefits within their own companies.
If you have had the unenviable experience of using another person’s spreadsheet when it has not followed any particular set of modelling principles, I hope this idea of structure and standardisation sounds appealing.
The FAST methodology adds real value on a regular basis when I find myself explaining some part of my modelling logic to a client face to face. FAST makes it easy to trace back the assumptions and calculations behind each of the financial line items on your outputs. So if a Chief Financial Officer asks me to talk him or her through the cost of goods sold calculation logic, I can hit a few keys and find myself at the COGS section of my calculations worksheet with consistent and structured calculation blocks ordered appropriately. It’s hard to quantify how much value is gained from always being able to quickly and confidently explain your logic to a client, but I’d say it’s almost priceless for the work we do. Financial modellers at your business can deliver the same quick explanations for their internal clients using the FAST methodology.
FAST Modelling – 5 Reasons why you should adopt it
Excel spreadsheets are widely used throughout most businesses. From our experience Excel users typically build models according to their own tastes, based on tips they have gleaned from the office ninja or from Google and You Tube.
The result of this approach is overly complex, poorly designed models that cause a host of user issues that in turn lead to business inefficiencies and increased risk.
As Jeffrey Dean McClelland rather neatly puts it:
“Spreadsheets are like underwear, you like yours, but you don’t necessarily want to share anyone else’s.”
The FAST Standard was created to define and promote good financial model design. It promotes a consistent, transparent model structure and clear, crisp modelling style.
Whilst The FAST Standard was created with Financial Models in mind, we believe the core principles could and should be applied to all spreadsheet modelling. And here is why:
Well-structured spreadsheets are less prone to errors and easier to review. The FAST Standard prescribes consistency of structure. The calculation block methodology of bringing the ingredients for each calculation together makes it much easier to validate calculation logic and accuracy.
Spreadsheets built to the FAST Standard have a consistent structure at the workbook, worksheet and row/column level making it easier to review and share models. Imagine picking up someone else’s model and being able to understand it as if you built it yourself. This is what you get when you adopt the FAST Standard.
Spreadsheets are easier to use and to share, saving time at key points in critical processes. It’s very easy to underestimate the amount of time wasted each month due to your team using poorly constructed spreadsheets. Applying the FAST Standard to your spreadsheet models will make your team more efficient.
Spreadsheets built to the FAST Standard are easily changed and extended without the need for a complete re-work.
Changing a model significantly increases the risk of mistakes. Using FAST modelling techniques, the model logic and flow is much easier to trace and change correctly, reducing the risk of error.
5. Clear and simple
Spreadsheets are clear and simple. No more “one-page-wonders” or formulae that are five rows long that you need a degree in quantum physics to understand. Just a well-structured, clear and simple model.
Be smart with your modelling, by being FAST.
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