Creating a 3 way financial model is always a complex process for businesses. It attempts to map and illustrate how operational decisions and investments affect the financials of a business over a certain period of time. A 3 way financial model is an invaluable tool for a business’s decisions. Streamlining the process and experience of creating a 3 way financial model is crucial for any business that intends to use this tool in order to make essential decisions.

There are many benefits of streamlining the 3 way financial model. Most important benefits include leveraging available technology, making the process more transparent, involving fewer resources to complete the process, and reducing cost, time, and effort.

Key Takeaways:
  • Leverage available technology
  • Make the process more transparent
  • Involve fewer resources
  • Reduce cost, time, and effort

Identify and Prioritize Goals

Identifying and prioritizing your goals is fundamental to streamlining your 3-way financial model. It is helpful to analyze data and identify areas of improvement before setting goals. This allows you to properly assess the user experience and create achievable goals.

Analyze Data

Analyzing data is a crucial step in setting achievable goals. It can help to utilize spreadsheet application software to keep track of all financial data, including revenue, expenses, capital investments, debt obligations, and more. From there, you can identify patterns, trends, and areas of improvement that need to be addressed. This can provide a valuable bird's eye view of your 3-way financial model.

Identify Areas of Improvement

Once you have analyzed the data, you can then attempt to identify areas of improvement. For example, you may identify that investments are not yielding optimal returns, debt obligations are under-utilized, or revenues are decreasing due to outdated policies. By identifying areas that need improvement, you can set goals that are achievable and help streamline your 3-way financial model.

Analyze Inputs

Streamlining a 3 way financial model requires dissecting the model's inputs. This involves understanding the requirements, reviewing the accounts and assumptions, and scrutinizing the key drivers of the model. The following sections discuss various strategies to analyze 3 way financial models.

Understand Requirements

The first step to streamlining a 3 way financial model is understanding the business requirements driving the model. This involves asking questions like: What are the end objectives of the model? What decisions are being informed by the model? What assumptions are driving the figures? What are the sources of data? Answering these questions helps narrow down the scope of the analysis, making it easier to scrutinize the model's inputs.

Review Accounts and Assumptions

Analyzing a 3 way financial model involves assessing its accounts and assumptions. Examples of accounts to review include:

  • Revenue accounts
  • Cost accounts
  • Expense accounts
  • Asset & liability accounts
  • Cash flow accounts

It is important to understand the assumptions and logic behind each account. For example, consider understanding the growth assumptions of each account (if applicable), as well as the periodicity of the accounts (monthly, quarterly, yearly).

In addition to reviewing individual accounts, it is important to understand the relationships between accounts. This helps to identify any overlaps or inconsistencies in the model.

Simplify Assumptions

Simplifying or streamlining the assumptions used in an economic three-way financial model is an important part of ensuring accuracy and reducing the time needed to build and maintain an accurate model.

Automate Assumptions

One approach to simplifying assumptions is to automate the assumptions used in the model. This can be done by incorporating data sets into the model that update assumptions automatically, allowing for more accurate and timely assumptions.

Coded logic can also be incorporated into the model to automatically adjust assumptions based on real-time data. By automating assumptions, it eliminates the need to manually review and update assumptions regularly, while also improving the accuracy and reliability of the model.

Pre-Fill Outputs

Another way to streamline assumptions is to pre-fill outputs. This means automatically populating the outputs of a particular model with assumptions that apply to the particular context. This eliminates the need for manual adjustments and increases the speed at which changes can be taken into account.

Pivot tables can also be used to pre-fill outputs, as well as to ensure that assumptions are in line with the data behind them. By using pivot tables, it's possible to quickly review assumptions and adjust them as needed without having to manually review and update the data.

5. Test and Refine Model

Testing and refining your three way financial model is an important step in ensuring that your model is accurate and comprehensive. This step involves more than just activating and testing formulas; it also involves looking at the output, testing assumptions, and verifying the accuracy of all data and calculations.

A. Test Outputs

The outputs of a three way financial model reveal trend data such as pricing changes or worsening operational costs that managers can respond to. To test the outputs of a three way model, start by verifying that the proper formulas are connected to the right cells. Once this is done, assess if any of the formulas or data should be adjusted. For example, line items in income statements should accurately reflect the shares of equity held by the two owners.

B. Test Management Reporting

In addition to testing the outputs of your three way financial model, you should also test the results of any management reporting. Management reports should interpret the model's outputs and provide actionable information. To verify that management reports are accurate, start by checking the formulas for accuracy. You should also examine assumptions used in the calculations and verify their accuracy before accepting the results of the management reports.

Testing and refining a three way financial model is an important step in ensuring that the model produces reliable and useful information. Test the outputs of the model and verify the accuracy of the management reports. This helps to guarantee that the model provides accurate and relevant information to aide in your financial decision making.

Overhaul Model Package

When creating a 3-way financial model, there are several tried-and-true strategies that can be employed to facilitate the completion of the project. Streamlining the project and ensuring a high-quality end product requires careful planning and attention to detail.

Review Slide Structure

The first step in streamlining the 3-way model is to review the actual slide structure. Evaluating the current structure of the slides can help to identify areas that need improvement and more efficient ways to organize the content. Assessing the existing model structure can help to highlight potential inefficiencies or redundancies in the project. Additionally, taking the time to ensure that the layout of each slide is easily regarded and visually attractive can improve model flow and engagement with the user.

Structure Tables & Charts

Making sure the tables and charts included in the 3-way financial model are both aesthetically pleasing and organized for succinct digesting is another key strategy for streamlining the model. Structuring the data and information in a simple, logical, and culturally-appropriate manner enables the user to effectively interpret the data and extract pertinent insights from the model.

Creating tables and charts with appropriate font size, alignment, orientation, and color scheme can help facilitate an efficient and accurate understanding of the content. Additionally, updating the formatting of existing tables and charts as needed can make the model more aesthetically pleasing, which can enhance user engagement and visualization of the data.


The 3 way financial model is often used by business owners and executives to gain insight and track performance. After taking the necessary steps to organize and structure the model, users should be able to access and edit the model within minutes. Streamlining the 3 way financial model with the aforementioned steps will allow users to better analyze, track and report on their finances.

Summarize Steps

We have discussed several strategies that can be used to streamline the 3 way financial model. Some of the key strategies to take include developing a custom model or template, combining or separating line items into meaningful sections, and tracking necessary metrics by assigning labels.

Finalize Model Package

After completing all of the steps, the 3 way financial model is now optimized for usage. To ensure that the model is accessible, users can create a separate folder containing the initial templates, calculations, historical notes and any other documents associated with the model. With a streamlined 3 way financial model, users can be confident that the data will be accurate and up to date, with the ability to quickly make changes when needed.

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