Before Your Model Reaches an Investor
The financial model review exists because of a simple and consistent pattern: the errors in a financial model are almost never found by the person who built it. They are found by the investor during due diligence, by the bank's credit analyst reviewing the lending application, by the board member who notices the balance sheet does not reconcile, or by the acquirer's team who builds their own model from the target's P&L and gets different numbers.
Every one of these discovery events is worse than finding the error yourself. A model error found during due diligence damages the management team's credibility. A model error found by a lender delays - and sometimes derails - a credit decision. A model error found by a board member raises questions about the quality of the financial management. A model error found by an acquirer's team raises questions about the quality of everything else in the data room.
The review finds them first.
Seven-Dimension Audit Framework
1. Structural Architecture
Is the model structured to SMART Standard principles? Are inputs, calculations, and outputs separated? Does information flow in one direction? Are formulas consistent across rows and columns?
2. Formula Integrity
Does every formula do what it appears to do? Are there hardcoded numbers embedded in formulas that should be referenced from the assumptions sheet? Are there circular references - and if so, are they resolved correctly?
3. Three-Way Integration
Does the balance sheet balance in every period? Does the cash flow statement correctly capture working capital movements? Does the closing cash on the cash flow statement equal the cash on the balance sheet?
4. Assumption Quality
Are the key assumptions commercially reasonable and internally consistent? Are they clearly labelled and documented? Are the most sensitive assumptions tested through scenario analysis?
5. Scenario Design
Is the downside case genuinely adverse - or a cosmetically adjusted base case? Does the scenario manager work correctly - switching between scenarios with a single input and updating all three statements?
6. Presentation and Usability
Can a competent financial reviewer navigate the model without assistance? Is the summary dashboard clearly laid out? Are the key metrics presented in a format suitable for the intended audience?
7. Model Documentation
Are assumptions documented with their basis? Are any external data sources referenced? Can someone unfamiliar with the model understand its structure and purpose?
What the Review Produces
A written findings report identifying every issue by dimension, severity, and corrective action
A corrected version of the model with all structural and formula errors fixed
A verbal debrief with the management team covering the findings and the corrections
Recommendations for improving the model's presentation for the specific audience
What Happens After the Review
The review produces a findings report and a corrected model. What happens next depends on what the review finds.
When the review identifies issues that can be corrected within the existing model structure - formula errors, hardcoded assumptions, presentation gaps - the corrected model is delivered as part of the engagement and the business can proceed with confidence. Most reviews fall into this category.
When the review identifies structural problems that cannot be corrected without rebuilding - a model where the three statements are not genuinely integrated, where the cash flow statement does not correctly capture working capital movements, or where the scenario manager does not function correctly - the corrected model is not fit for purpose with sophisticated audiences. In these cases the right outcome is a rebuild of the integrated model from the ground up, using the correct architectural principles from the start. This is a more significant engagement, but it is the only path to a model that will hold up under due diligence.
Where the structure is sound but the assumptions have not been stress-tested, the immediate next step is typically scenario modelling and sensitivity testing - adding a properly constructed downside case, an upside case, and a two-way sensitivity table to the existing model. Investors and lenders expect to see this. A model that presents only a base case is a model that has not been tested.
Where the review reveals that the model was built by a capable internal finance team who would benefit from building more robust models going forward, many clients follow the review with Excel financial modelling training for the relevant team members - covering SMART Standard principles, three-way integration, and scenario design so that future models are built correctly from the outset rather than reviewed and corrected after the fact.
Work With a Financial Modelling Consultant Based in Melbourne
Wiseworth reviews financial models for Australian businesses at every stage — pre-seed through to pre-IPO, across every sector. If you have a model that needs to be right before it reaches an investor, a lender, or a board, the review is the right first step. As a financial modelling consultant based in Melbourne, Mark Jeanes works with management teams across Australia who need an independent expert assessment of their model before it is presented to a sophisticated external audience.
Book a Discovery Meeting
Call: +61 449 502 425 | Email: contact@wiseworth.com.au
Written by Mark Jeanes
Principal, Wiseworth | Financial Modelling Consultant
Former institutional banker — NAB, ANZ, Banque Paribas, Deutsche Bank
B.Bus Systems, Monash University | Grad. Dip. Applied Finance and Investment, Securities Institute of Australia | LinkedIn