The Standard Sophisticated Investors Expect
When an Australian investor, institutional lender, or board with financial expertise asks to see your financial model, they expect a three-way integrated financial model - a profit and loss statement, a cash flow statement, and a balance sheet that are dynamically linked and reconciled in every forecast period.
A standalone P&L projection is not a financial model. It is a revenue forecast. It answers the question of whether the business is profitable - and nothing else. It does not show whether the business generates cash, what the balance sheet looks like, how debt affects the financial position, or what happens to working capital as the business grows. Sophisticated financial decision-makers cannot make a complete assessment of a business's financial position from a P&L alone - and they know it.
The three-way model is the minimum standard for any business facing a significant external financial decision. Wiseworth builds three-way integrated financial models for Australian businesses across every sector and stage.
What Makes a Model Genuinely Three-Way
The word "three-way" does not simply mean a model that contains three separate financial statements. It means a model where the three statements are dynamically integrated - where every assumption flows through all three statements simultaneously and the statements remain internally consistent at all times.
This integration is achieved through specific linkages: net profit after tax from the P&L flows into retained earnings on the balance sheet; depreciation charged in the P&L reduces the net book value of fixed assets on the balance sheet and is added back in the operating cash flow section; debt drawdowns and repayments appear in both the balance sheet liabilities and the financing cash flow section; and the closing cash balance on the cash flow statement must equal the cash balance on the balance sheet in every period.
When all of these linkages are correctly built, changing any assumption - a revenue growth rate, a cost assumption, a capital expenditure item - updates all three statements simultaneously and consistently. The model remains a coherent representation of the business under the new assumption.
What a Three-Way Model Reveals That a P&L Cannot
The most important thing a three-way model demonstrates - and that a standalone P&L cannot - is the difference between profit and cash. A business can be profitable and simultaneously run out of cash. This is not a theoretical edge case. It is one of the most common causes of business failure in Australia, and it is entirely invisible in a standalone P&L.
The cash flow statement captures three categories of cash movement that do not appear in the P&L. Working capital movements - the cash tied up in receivables and inventory that grows as the business grows, consuming cash even in profitable periods. Capital expenditure - the immediate cash outflow when a business invests in assets, which does not appear in the P&L (only the subsequent depreciation does). Debt repayment - the principal repayments on loans, which reduce the balance sheet liability and consume cash but do not flow through the P&L.
The balance sheet captures the cumulative financial position of the business — its assets, its liabilities, and the equity that remains for shareholders. For any business with significant fixed assets, working capital, or debt, the balance sheet is essential context for understanding whether the business's financial position is strengthening or deteriorating over time.
What Wiseworth Builds
Every three-way financial model Wiseworth delivers includes the following components.
Assumptions Sheet
All inputs held in a single, clearly labelled sheet — revenue growth rates, margin assumptions, headcount plan, capital expenditure schedule, debt terms, working capital days, tax rates. All calculations reference these inputs from the assumptions sheet. Changing any assumption updates the entire model.
Revenue Model
Built from the commercial mechanics of the business — customer acquisition, pricing, volume, retention, and product mix — rather than from a top-line growth rate applied to the prior period.
Headcount and Cost Model
People costs are built from a headcount plan showing each hire by role, start date, and fully loaded cost including superannuation, leave loading, and on-costs. Operating costs modelled by category with specific drivers.
Three-Way Financial Statements
Integrated P&L, cash flow statement, and balance sheet - monthly for the first 24 months, annual thereafter to the end of the forecast horizon. A balance check formula in every period confirming Assets equals Liabilities plus Equity. An independent financial model review is the most reliable way to identify and resolve these errors in a model built internally.
Debt and Working Capital Schedules
Debt schedules showing opening balance, drawdowns, repayments, interest, and closing balance for each facility. Working capital schedules showing debtor days, creditor days, and inventory days driving the balance sheet balances.
Scenario Manager
Base case, upside cases, and downside cases - up to 20 - with a scenario selector that switches between them with a single input and updates all three financial statements simultaneously plus the can see the results of all 20 scenarios at once, like having 20 models in one. This is where scenario modelling and sensitivity analysis becomes a genuine decision-making tool rather than a compliance exercise: investors and boards can see exactly how the business performs under each assumption set before committing capital.
Summary Dashboard
Key metrics presented in a format suitable for investor or board review - revenue, gross margin, EBITDA, net profit, operating cash flow, closing cash, and any sector-specific metrics relevant to the business. For businesses in a fundraising process, the dashboard is also the basis for business valuation modelling - the metrics it surfaces are the inputs investors will use to assess enterprise value and price the round.
When You Need a Three-Way Model
A three-way integrated model is necessary - not optional - in the following situations.
Raising equity capital from sophisticated investors who will conduct financial due diligence
Applying for a bank loan or non-bank lending facility where the lender assesses balance sheet strength and debt serviceability
Preparing for a business sale or acquisition where the buyer will model the combined entity
Presenting a strategic plan to a board with directors who have financial expertise
Planning a significant capital programme where the interaction between capex, depreciation, debt, and cash needs to be understood completely
Once a capital raise closes, the model's job is not finished. Many businesses transition from a fundraising model into an ongoing financial forecasting and budget modelling process - using the same integrated structure to track actual performance against the projections presented to investors and to build the rolling forecasts that boards and lenders expect on a quarterly basis.
Who We Work With
Wiseworth builds three-way financial models for Australian businesses across a wide range of sectors and stages. Two industries where demand for integrated capital raising models is consistently high are fintech companies raising growth capital— where investor scrutiny of unit economics, burn rate, and runway makes a robust three-way model non-negotiable — and property development and PropTech businesses, where the interaction between construction debt, equity, presales, and project cash flows requires an integrated model to be understood correctly by any lender or equity partner.
Frequently Asked Questions
What is a three-way financial model?
An integrated financial forecast linking the P&L, cash flow statement, and balance sheet into a single dynamic model where every assumption flows through all three statements simultaneously. When any assumption changes, all three statements update and remain internally consistent.
What is the difference between a P&L and a cash flow statement?
The P&L measures profitability — revenue earned and expenses incurred regardless of cash timing. The cash flow statement measures actual cash movement. The difference arises from timing (revenue invoiced but not yet collected) and non-cash items (depreciation reduces profit but involves no cash). A business can be profitable and simultaneously run out of cash.
Why does the balance sheet need to balance?
Because Assets equals Liabilities plus Equity is the fundamental accounting equation. In a three-way financial model, a balance sheet that does not balance in every period is definitive proof of a structural error. A balance sheet that does not balance is proof that the model is wrong.
When does a business need a three-way financial model?
When raising equity capital, applying for debt financing, preparing for a business sale, presenting to a board with financial oversight responsibilities, or planning a significant capital programme. A standalone P&L is adequate for basic internal planning; a three-way model is required for any external presentation to sophisticated audiences.
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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 Ban
B.Bus Systems, Monash University | Grad. Dip. Applied Finance and Investment, Securities Institute of Australia | LinkedIn