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Financial Modelling

Financial Modelling, Forecasting, Scenario Planning & Sensitivity Analysis

Integrated financial models for budgeting, strategy, financing, investment decisions, M&A, valuations, business planning and cash-flow management.

  • Integrated P&L, balance sheet and cash flow
  • Driver-based revenue and cost forecasting
  • Scenarios, sensitivities and stress testing
  • Model review of existing spreadsheets

Quick answer

What is a three-statement financial model?

A three-statement financial model is an integrated forecast in which the profit or loss, balance sheet and cash flow are linked and driven by operating assumptions, so that revenue, cost, working capital, capital expenditure and financing all flow through to cash and the balance sheet balances. It is used for budgeting, funding, valuation, lender reporting and scenario testing, and its usefulness depends on driver logic, transparent assumptions and built-in checks.

Driver-based forecast
A forecast built from operating drivers such as customers, price and utilisation rather than a percentage growth rate.
Scenario vs sensitivity
A scenario changes a coherent set of assumptions; a sensitivity flexes one variable to isolate its impact.
Circularity
A calculation loop, typically interest on an average debt balance, that must be handled deliberately.
Model checks
Built-in tests — balance sheet balancing, cash tie-in, sign conventions — that make errors visible.

Overview

A model is only useful if the assumptions can be found and changed

Most spreadsheets fail for the same reasons: assumptions hard-coded inside formulas, no balance sheet or cash flow check, inconsistent rows, and no way to run a downside case without rebuilding the file. Decisions then get made on numbers nobody can trace.

We build models with inputs, calculations, outputs, checks and scenarios kept separate, driver-based revenue and cost logic, and integrity tests that fail visibly when something breaks. Every model is handed over documented, with an assumptions book, so your team can maintain and update it internally afterwards.

  • Inputs separated from calculations
  • Three statements fully linked
  • Balance and cash flow integrity checks
  • Scenario control in one place
  • Sensitivity and stress testing built in
  • Documented assumptions and source notes

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Client situations

Why companies ask us for a model

Select a situation to see what it usually involves.

Budget season

An annual budget with departmental detail, monthly phasing and variance tracking is required.

Services

Financial modelling services

Purpose, horizon, periodicity and handover are agreed in writing before work begins.

Integrated 3-Statement Models

Profit & loss, balance sheet and cash flow fully linked.

  • Linked primary statements
  • Supporting schedules
  • Assumption sheets
  • Integrity checks
  • Scenario control
  • Dashboards

Budget Models

Budgets that can be monitored, not just submitted.

  • Annual budgets
  • Departmental budgets
  • Cost centre budgets
  • Monthly phasing
  • Variance tracking

Rolling Forecasts

A forward view that updates with actuals.

  • 12-month
  • 18-month
  • 24-month
  • 36-month
  • Configurable rolling horizon

Cash Flow Forecasting

Short-term liquidity and longer-term cash planning.

  • Direct cash flow
  • Indirect cash flow
  • Weekly and monthly forecasts
  • 13-week cash flow
  • Liquidity monitoring

Business Plan Models

The financial engine behind the plan.

  • Revenue drivers
  • Headcount
  • Capex
  • Working capital
  • Financing
  • Tax
  • Profitability
  • Cash flow

M&A Models

Transaction economics under different structures.

  • Purchase price
  • Financing
  • Synergies
  • Acquisition accounting
  • Returns
  • Debt paydown
  • Accretion / dilution where applicable

Valuation Models

Valuation mechanics built to be reviewed.

  • Discounted cash flow
  • Market multiples
  • Terminal value
  • Equity bridge

Project Finance Models

Where within our capability and scope.

  • Project cash flows
  • Debt service
  • DSCR
  • IRR
  • NPV
  • Funding requirements

Fundraising Models

What is needed, for how long, at what cost.

  • Funding need
  • Runway
  • Cash burn
  • Dilution scenarios
  • Investor return cases

Debt / Covenant Models

Headroom monitored before it disappears.

  • Leverage
  • Interest cover
  • DSCR
  • Covenant forecasts
  • Refinancing scenarios

Model Review / Audit

Independent review of an existing model.

  • Formula integrity
  • Logic review
  • Assumption review
  • Circular references
  • Statement links
  • Scenario logic
  • Sensitivity logic
  • Hidden errors
  • Presentation

Model architecture

How every model is structured

Inputs, calculations, outputs, checks and scenarios are kept separate.

INPUTS

  • Assumptions in clearly labelled input sheets
  • Source data kept separate from calculations
  • No assumptions hard-coded inside formulas

CALCULATIONS

  • Formula-driven schedules
  • Consistent formulas across each row
  • Traceable workings

OUTPUTS

  • Primary statements
  • Dashboards
  • KPI summaries

CHECKS

  • Balance sheet check
  • Cash flow tie-in
  • Error and integrity tests

SCENARIOS

  • Base / Upside / Downside / Custom
  • Single scenario switch
  • Comparison outputs

Forecast structure

From actuals to the three statements

  1. 1

    Historical Actuals

    Cleaned historical base from the accounts.

  2. 2

    Operational Drivers

    The volume, price and capacity drivers that move the business.

  3. 3

    Revenue Forecast

    Driver-based revenue build.

  4. 4

    Cost Forecast

    Variable, fixed and payroll costs modelled separately.

  5. 5

    EBITDA

    Operating result before capital and financing effects.

  6. 6

    Working Capital

    Receivables, inventory and payables from DSO, DIO and DPO.

  7. 7

    Capex

    Asset additions, timing and depreciation.

  8. 8

    Financing

    Debt, repayments, interest and facilities.

  9. 9

    Taxes

    Tax charge on clearly identified assumptions.

  10. 10

    Profit & Loss

    Full income statement output.

  11. 11

    Balance Sheet

    Balance sheet with integrity check.

  12. 12

    Cash Flow

    Cash flow reconciled to movement in cash.

  13. 13

    KPIs

    Dashboard of the metrics that matter.

Revenue forecasting

Driver-based revenue builds

Flat percentage growth is used only where no better driver exists.

Price × Volume

Product businesses with identifiable units and pricing.

Supporting schedules

Component models

Cost model

  • Variable and fixed costs separated
  • Payroll, rent, marketing, technology and professional fees modelled separately
  • Inflation and volume relationships applied where appropriate

Headcount model

  • Role, department and opening headcount
  • Hires, departures and joining month
  • Salary, benefits, increments and bonus
  • Monthly payroll and headcount output

Working capital model

  • Receivables, inventory and payables
  • DSO, DIO and DPO drivers
  • Cash conversion cycle calculated

Capex model

  • Asset class, timing and cost
  • Useful life and depreciation
  • Cash payment profile
  • Maintenance versus growth capex

Financing model

  • Opening debt, new borrowings and repayments
  • Interest and revolving facilities
  • Leases and refinancing
  • Covenant calculations

Tax model

  • Accounting profit as the starting point
  • Taxable income adjustments
  • Tax loss assumptions
  • Current tax, with deferred tax simplified where appropriate
  • Tax assumptions clearly identified for review

Scenario planning

Scenarios built into the model

  1. Base Case

    The most likely management forecast, on agreed assumptions.

  2. Upside Case

    Improved growth, pricing or margin assumptions.

  3. Downside Case

    Adverse trading, cost and collection assumptions.

  4. Severe Downside

    Optional stress scenario for liquidity and covenant testing.

  5. Custom Scenario

    User-defined combination of scenario variables.

Scenario variables

Assumptions you can switch

Revenue growthSelling priceVolumeGross marginPayrollInflationCapexDSOInventory daysPayable daysInterest rateFX rateTax rateFunding

Scenario comparison

Metrics compared across scenarios

When it may be appropriate
Data normally required
Key limitations

When it may be appropriate
Data normally required
Key limitations

When it may be appropriate
Data normally required
Key limitations

When it may be appropriate
Data normally required
Key limitations

When it may be appropriate
Data normally required
Key limitations

When it may be appropriate
Data normally required
Key limitations

When it may be appropriate
Data normally required
Key limitations

When it may be appropriate
Data normally required
Key limitations

Scenario outputs are projections based on stated assumptions. They are not forecasts of actual results.

Sensitivity analysis

One and two-variable sensitivity tables

When it may be appropriate
Data normally required
Key limitations

When it may be appropriate
Data normally required
Key limitations

When it may be appropriate
Data normally required
Key limitations

When it may be appropriate
Data normally required
Key limitations

When it may be appropriate
Data normally required
Key limitations

Analysis

Tornado, break-even, stress testing and runway

Tornado analysis

  • Assumptions ranked by impact
  • Impact measured on EBITDA, cash, valuation, IRR or NPV
  • Largest value drivers displayed first

Break-even analysis

  • Revenue break-even
  • Unit break-even
  • EBITDA break-even
  • Cash break-even
  • Contribution margin assumptions shown

Stress testing

  • Revenue −10%
  • Margin −5%
  • DSO +30 days
  • Interest +2%
  • Adverse FX movement
  • Capex overrun and delayed collections
  • Liquidity impact quantified

Liquidity / runway

  • Monthly burn
  • Minimum cash requirement
  • Cash runway
  • Funding gap
  • Indicative financing date

Dashboard

KPIs reported

Revenue growthGross marginEBITDA marginNet marginWorking capitalCash conversion cycleFree cash flowROICDebt / EBITDAInterest coverDSCRCash runway

Model control

Model control standards

Structure

  • Clearly labelled inputs
  • Formula consistency across rows
  • No unexplained hard-codes

Integrity

  • Balance sheet check
  • Cash flow check
  • Error checks
  • Scenario control

Documentation

  • Version and date control
  • Assumptions documentation
  • Source notes for each input

Output

Deliverables

Core models

  • Integrated Financial Model
  • Forecast Model
  • Budget Model
  • 13-Week Cash Flow

Transaction models

  • M&A Model
  • DCF Model
  • Funding Model

Analysis outputs

  • Scenario Model
  • Sensitivity Analysis
  • Board Dashboard

Documentation

  • Model Assumptions Book
  • Model Review Report
  • Handover and training notes

Sectors

Industries we work with

ManufacturingTrading & DistributionRetailE-commerceTechnologySaaSHealthcareHospitalityReal EstateConstructionLogisticsProfessional ServicesEducationEnergyFinancial ServicesFamily Businesses

Global coverage

Coverage and scope boundaries

How we work internationally

  • We build and review models for companies operating across multiple jurisdictions and currencies, subject to applicable local legal, regulatory and professional requirements.
  • Multi-entity and multi-currency structures are modelled with translation and consolidation logic where required.

Scope boundaries

  • A model is a projection tool, not a forecast of actual results
  • Assumptions remain management's responsibility and are documented as such
  • Tax assumptions are identified for specialist review
  • We do not provide investment advice or recommendations on securities

Getting started

Information normally required

Financial history

  • Historical financial statements
  • Trial balance
  • Management accounts

Plans and drivers

  • Business plan
  • Operational drivers
  • Price and volume assumptions
  • Payroll and headcount plan

Capital and targets

  • Capex plan
  • Debt schedule
  • Working capital assumptions
  • Tax assumptions
  • Management targets

Resources

Checklists

Request our financial modelling data checklists

Select the checklist you need and we will email it to you. This creates an enquiry record only — marketing consent is separate and optional.

FAQ

Frequently asked questions

Summary

Key takeaways

  • A forecast without a cash flow statement and a balancing balance sheet is not a model.
  • Assumptions belong in an input sheet, separated from calculations and outputs.
  • Growth percentages are not drivers; customers, price, capacity and churn are.
  • Scenarios must include a downside case, not only the management plan.
  • Model checks and version control are part of the deliverable.

Primary sources

  • IFRS Accounting Standards — for the basis of the historical figures the model is built on
  • Firm modelling standards — structure, documentation, checks and version-control conventions

References are provided so positions can be verified against the current text of the applicable law, guidance or standard. Requirements change; always confirm the version in force for the period concerned.

Last updated
16 August 2026
Reviewed by
Financial Modelling & CFO Services team
Content owner
Head of the relevant service line
Next review due
12 February 2027

Videos

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Get in touch

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Request a financial model

Tell us the purpose, horizon and deadline. A specialist will review your submission and respond.

Files are stored securely and classified against your enquiry only, not in a client data room.

Your submission is checked against our existing records — no duplicate company file is created.

The content on this page is general information about our services. It is not advice and does not create a professional relationship. Tax, accounting and regulatory requirements change; positions depend on the applicable law of the relevant jurisdictions, the version in force for the period concerned and the facts of each case.

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