A 3 Way Financial Model is a crucial tool used by businesses in order to make effective financial decisions. It is used to analyze how changes to revenue, costs, and expenses affect a business's overall financial situation over set periods of time. Customizing a 3 Way Financial Model can help to ensure that businesses are able to take into account their own specific needs, objectives, and situation. In this blog post, we will explore some of the strategies for customizing your 3 Way Financial Model.

The first thing to consider when customizing your 3 Way Financial Model is defining objectives. This involves determining the desired outcome from preparing the model, such as understanding the impact of changes to revenue or expenses. Additionally, it is important to consider the specific information that will be used in the model. This includes sales and expenses forecasts and data on sources of financing. Once these objectives have been identified, the next step is to create an outline of the 3 Way Financial Model.

Key Takeaways

  • Define objectives when customizing your 3 Way Financial Model.
  • Consider the specific information that will be used in the model.
  • Create an outline of the 3 Way Financial Model.

Primary Customization Strategies

For a comprehensive three-way financial model, customization is key. Every business is unique and individualized, so custom forecasting and analyses are needed in order to accurately predict your company’s financial position. The following strategies address the primary customization options for a 3 way forecast.

Types of Assumptions

At the core of any financial model are assumptions. This can range from assumptions about the economy and market trends, to the basic operating costs of your company. It is important to capture the most up-to-date trends in your forecasts. This could include local and global regulations, as well as external factors, like changes in oil prices or currency exchange rates. This can significantly affect revenues and profits.

Flexible Assumptions

When creating a 3 way financial model, flexibility is paramount. Assumptions made in the forecast should account for any changes that can occur in the market or your own company. Being able to make changes to key assumptions on the fly can help you identify which financial strategies yield the best result. Additionally, by considering the potential implications of changing your assumptions, you can fine-tune your model to be as accurate as possible.

Cash Flow Assumptions

For a 3 way model to be useful, the assumptions used must accurately reflect the cash flows of the business. This means making assumptions about the sources and uses of cash. What sources of capital (debt and equity) will the business use? How much cash will be invested in operations? What discretionary investments will be made? All of these assumptions will impact the cash flow and should be established prior to executing the model.

Sourcing Costs

Cost assumptions are also integral to a 3 way financial model. This includes costs related to operations, sales, administration, and any other relevant activities. It is important to have a comprehensive view of the costs to ensure that the model reflects the current situation. This includes both direct and indirect costs. Direct costs are related to labor and materials, while indirect costs are more associated with overhead and administrative functions. Accurately accounting for these costs is key to creating a useful 3 way financial model.

Automation Strategies

Automation strategies can help you to quickly customize your 3 way financial model and make data manipulation easier. Excel functions, Visual Basic for Applications and other application integrations can help with streamlining your financial model.

Utilizing Excel Functions

Utilizing Excel functions can help you quickly customize the financial model. There are certain functions that can help with data manipulation such as SUMIFS, VLOOKUP and IFERROR. These functions can help automate a task and quickly help to customize the model.

Incorporating Visual Basic for Applications

Visual Basic for Applications (VBA) is a powerful programming language used by many financial professionals. VBA can help automate tasks in Excel and provide custom commands when creating a 3 way financial model.

Integrating Financial Model into other Applications

Integrating financial model with other applications can help streamline the data manipulation process. Applications such as Microsoft Access, SAP and Oracle can help link the financial model to other systems and make data control easier.

Fine-tuning Strategies

It's easy to build a three way financial model, but to make sure it is truly effective, investors must fine-tune the model so it provides the most accurate representation of their business. Here are several strategies they can use to customize their model:

Planning for Future Events

In order to make the most accurate predictions, investors must plan for future events that are likely to occur. This means forecasting cash flows based on upcoming product launches, major customer contracts, or future investments. Creating separate sheets for each event can help track predicted spending and income for each event, as well as provide backup evidence should investors need to backtrack.

Incorporating Scenarios

It’s incredibly important for investors to create “what-if” scenarios in their three way financial model. This includes refining assumptions for revenue, expenses, taxes, and interest rate changes. Building a scenario for each potential outcome will help investors proactively respond to the likely effects of volatile market conditions. For example they could model a scenario with different tax laws in order to determine how profitable the business would be under each case.

Embedding Sensitivity Analyses

A sensitivity analysis is a tool that investors can use to identify any external factors that may affect their business. This includes variables such as market share, pricing, currency exchange rates, and economic conditions. By embedding these analyses into the model, they will be able to accurately respond to environmental changes and make appropriate adjustments to their business plan.

  • Run simulations to explore the merits of different design decisions.
  • Avoid using too many assumptions when forecasting revenues.
  • Test different scenarios to identify any potential issues.
  • Incorporate sensitivity analyses to plan ahead for future market changes.

Usability Strategies

When crafting a financial model, it is essential to think about how the users of the model will interact with its functions and features. Implementing smart usability strategies can increase user satisfaction and make the model more efficient.

Designing an User Friendly Interface

The interface of the model should be designed to reflect the preferences of the users. If a user needs to make quick changes or input data, the multi-level menus should be simplified or minimized. Furthermore, graphical representations of the model’s output should be included, so that the user can quickly and easily spot any discrepancies.

Establishing Documentation

In order to maximize the usability of the model, model documentation should be clearly collected and organized. The documents should outline the purpose of each function and how the different elements interact with each other. This will allow new users to easily understand the model and detect any issues quickly.

Implementing Control Panels and Dashboards

A great way to make the model more efficient is to implement control panels and dashboards that display the most important performance metrics. This will allow users to track the effectiveness of their decisions quickly, and make adjustments on the fly. Visual cues should be added to monitor changes, and the control panel should be easily customizable.

Security Strategies

A 3-Way Financial Model is an essential tool for any business that is looking to forecast their financials over a set period. Creating and customizing one, however, can require a lot of effort and an understanding of the company’s operations, regulations, and various other points. It is easy to overlook security, but taking steps to ensure that a 3-Way Financial Model is secure is an integral part of the customization process.

Implementing Multi-User Access

One of the best ways to ensure the security of a 3-Way Financial Model is by implementing multi-user access. This allows for multiple people to access the model at the same time and makes it easier to track changes, adds, and deletions across the board. It also ensures that no one user has full control over the model and that any changes that are made are approved by the necessary personnel. It is also important to make sure that the roles of each user are clearly defined, so that everyone knows what their rights and responsibilities are when it comes to accessing and modifying the model.

Encrypting Sensitive Data

Another important security measure to take when customizing a 3-Way Financial Model is to encrypt any sensitive data that is used. This helps to ensure that any financial information that is entered into the model remains secure and can only be accessed by those who should have access. Encryption also helps to prevent unauthorized access to the data and can help reduce the risk of any data being stolen. It is also important to make sure that any encryption methods used are up-to-date and that the encryption keys are kept secure.

Introducing Password Authentication

Finally, introducing password authentication is another important security measure that should be taken when customizing a 3-Way Financial Model. Password authentication helps to ensure that only those who have the proper credentials can access the model and make changes. It is also important to ensure that any passwords are complex, unique, and updated on a regular basis to ensure maximum security. Additionally, it is important to provide users with multiple attempts before locking them out, to avoid any issues with data being lost due to unauthorized access.


Developing a customized three-way financial model is a great way of assessing the financial health of a business and its performance over time. With the right strategies and approach, you can tailor your model to meet your unique business and financial needs. In this blog post, we discussed five strategies that you can use to customize your three-way financial model, including:

  • Researching and gathering data
  • Organizing data into logical data sets for modeling
  • Choosing the right software and other tools
  • Building and calibrating the model
  • Testing and refining the model

By leveraging these strategies and taking the time to properly customize your model, you can get an accurate picture of the performance of your organization and its financial health, ensuring that you can make the best decisions for the future of your business.

Recap of Customization Strategies

In this blog post, we discussed five strategies that you can use to customize your three-way financial model: researching and gathering data, organizing data into logical data sets for modeling, choosing the right software and other tools, building and calibrating the model, and testing and refining the model. By leveraging these strategies, you can ensure that your model is tailored to the unique needs of your business and gives you an accurate picture of your financial health.

Outlining Future Model Development

In addition to customizing your three-way financial model, it is important to have a plan for future development of the model. As your business and the financial environment change, your model needs to be updated and maintained to ensure it is giving you an accurate representation of your performance. To keep your model up-to-date, you should plan for regular reviews and updates to the model, as well as regular testing and refinement.

Final Thoughts

Developing a customized three-way financial model is a great way of getting a clear picture of your business’s current financial health, as well as being able to make better decisions for the future. By leveraging the right strategies and taking the time to properly customize your model, you can ensure that it gives you an accurate representation of your financial performance, enabling you to make the best decisions for your business.

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