FAST Modeling Method
From FAST Modeling Method
Welcome to the FAST Modeling Method, which is published openly and regularly revised by the moderators of the FAST Modeling Alliance. The Method advocates a philosophy of good financial model design and construction habits stemming from the acronym FAST: flexible, accurate, structured, and transparent.
Analogies between good modeling and good writing standards are legion. Modeling style is objectively good or bad. Only a minority of modeling alternatives are simply one modeler's preferred approach over another.
The writing analogy extends to the means of organizing a specification: what works for the budding author works for the financial modeler. For a writing method, an experienced author would first counsel on how to organize the book into chapters, then drill into advice on structuring individual chapters, guidance on structuring paragraphs, and finally details on good sentence structure (including word choice).
In this spirit, the FAST Modeling Method organizes the discussion of financial model design into four levels:
- Workbooks: logical order and organizing by chapter types
- Worksheets: design layout, including column usage and breaking into 'sections' and 'paragraphs'
- Calculation Blocks: autonomous 'paragraphs' limited to one idea, i.e. a single calculated quantity or line item
- Formulas: short, simple, direct, and easily readable
Within these interlinked web pages, the practitioner will find good approaches to designing and constructing financial models: organizing 'the book', chapter layout, paragraph structure, and the tactical 'style' of writing readable formulas. And yes, no discussion on this latter topic would be complete without providing some comments on Excel functions often used in financial modeling: the good, bad, and ugly.
The FAST Modeling Method speaks predominantly about outcome; what the final model should look like. It dwells little on the tradecraft of constructing models to achieve the recommended outcome. For instance, it does not detail the use of recommended Excel keystrokes or so-called shortcut keys -- vastly superior to using a mouse in almost all circumstances – on which the FAST Modeling Method relies.
However, many of the design recommendations in this Method link expressly to inbuilt Excel functionality, and hence are sympathetic to Excel's strengths and weaknesses. Recommending designs that take advantage of efficient and error-reducing construction techniques is part of the Method's objective. For instance, the local display of precedents via simple links that tie directly to the source calculation is vital to take advantage of the Excel functionality of Ctrl-[ (to hop to precedent), then followed by F5 Enter (as the Goto feature buffers only the last location by default). This is one of the prime reasons to eliminate daisy chaining. Conversely, Microsoft's poor implementation of Excel Names lies at the heart of aversion to their widespread use.
Finally, though the Method does focus on the efficiency and integrity with which a model's 'engine' can be built, the modeler should not lose sight of a model's main purpose: presentation; a financial model must foremost communicate numeric results: relevant and meaningful charts, good summary pro forma financial statements that can be printed, etc.
