Financial modelling
Financial modelling is the process of creating and analysing a financial company or project model, which involves calculating and forecasting various financial metrics: revenues, expenses, profit, cash flows, and others. It is used for managerial decision-making, including preparations for mergers and acquisitions (M&A), fundraising, development of growth strategies, and evaluating the efficiency of both existing operations and new investment projects.
Financial planning helps identify opportunities to increase revenue, utilise organisational resources in a productive manner, define development directions, and establish viable financial relations with the budget, banks, and other entities.
Financial modelling includes the following stages:
- Defining the model’s purpose. The client outlines key objectives, tasks and issues the model must address (e.g., multiple scenarios, KPIs, capital investment efficiency, budget line items, debt financing). Financial metrics for the final report are identified, along with the level of indicator detail and calculation depth. The model requirements are also collected and documented, and the planning and forecasting periods of the model are determined.
- Business information collection. FBK consultants compile a detailed request for financial, operational, managerial, and other qualitative and quantitative data. In case of incomplete or conflicting data, the input data is optimised.
- External data collection and market analysis. FBK leverages public and proprietary data sources, industry reviews, statistics, expert insights, and macroeconomic market forecasts (both Russian and international).
- Model design and development of multiple scenario business forecasting. At this stage, a model map is created outlining its structure and segment interconnection. Model prototypes and tables with calculation formulas are developed. Output reports and various visualisations (charts, graphs, metric cards) are produced.
- Creation of complex calculation forms for business development scenarios. Internal and external data inputs are entered into the calculation algorithm to simulate various business scenarios. Outputs are created in the form of forecasted financial statements, KPIs, and other agreed-upon visualisations, followed by verification and adjustment. Findings are interpreted and presented to decision-makers.
- Model verification and client approval. FBK consultants explain the model’s logic, present outcomes and refine it until clarity is achieved. Updates due to new objectives are possible.
- Model description. It includes structure, usage and modification guidelines, as well as a description of key results.
Upon completion of financial modelling, the client receives:
- Financial model of the business or project.
- Spreadsheets enabling scenario simulations for holdings, companies, divisions, or projects.
- User guide (if required).
FAQs
How is financial modelling different from business valuation?Financial modelling creates and analyses a company’s financial model, which includes forecasting revenues, expenses and profits. Financial modelling allows you to integrate a variety of scenarios into the forecast, to work out any scenarios and to assess the sensitivity of business performance indicators from various external and internal factors. Business valuation, on the other hand, analyses the market, competitors and the company’s potential to determine its worth.
What should a financial model NOT be confused with?
A financial model should not be confused with a business plan, budget and statement of profit or loss. A business plan is a multi-year project roadmap with calculations. A budget is an approved financial plan with fixed indicators. The profit or loss statement contains actual while the financial model contains forecast figures.
Our advantages
Expertise
FBK’s portfolio includes successful financial modelling cases for companies of various sizes and industries.
Expert Team
Our project teams include consultants with deep expertise in financial modelling and related fields, experienced in complying with international requirements and working with major corporations, state entities, and banks.
Confidentiality
FBK ensures high information security standards.
Key Persons
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