Choose Financial Modeling Methods
Choose assumptions that explain each line, then follow their effects through the connected financial statements.
Growth, costs and cash · FY2026–FY2027
Preview · Illustrative values · EUR thousandsIncome Statement
| Line item | FY2026 | FY2027 |
|---|---|---|
| Revenue | 12,960.0 | 13,996.8 |
| Cost of goods sold | (7,516.8) | (8,118.1) |
Balance Sheet
| Line item | FY2026 | FY2027 |
|---|---|---|
| Accounts receivable | 1,704.3 | 1,840.7 |
| Long-term debt | 3,000.0 | 3,000.0 |
Cash Flow Statement
| Line item | FY2026 | FY2027 |
|---|---|---|
| Cash flow from operations | 2,107.7 | 2,274.5 |
| Change in cash | 984.0 | 1,115.1 |
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Choose the method from the business question
A modeling method describes how a line is calculated. Before choosing one, define its unit, time period, economic cause and source of evidence. Revenue may follow demand and capacity; receivables follow sales and collection timing. The most useful method exposes an assumption that a reviewer can explain, challenge and update.
Separate observed history from forecast assumptions, and distinguish flows during a period from balances at its end. Start with the simplest method that answers the question. Add detail when it changes a decision or makes an important dependency visible. The BalanceCheat methods reference lists the choices supported by each product line.
Explicit amounts and growth-based forecasting
Use an explicit amount for a known contract, planned payment or independently estimated cost. An annual insurance premium of 120,000 can be a direct assumption. Its payment date is a separate cash-timing question. A fixed amount is transparent, but it will not respond to higher activity unless that relationship is modeled.
Growth extends a comparable prior value: revenue of 10 million growing by 8% becomes 10.8 million. Check the starting level, recurring revenue and whether growth comes from price, volume or acquisitions. Applying the same rate to every line can conceal different cost behavior. The revenue model provides a practical setting for sales assumptions.
Percentages of revenue and operational drivers
A revenue ratio suits a cost that scales with sales. COGS at 60% of revenue of 10 million equals 6 million, leaving a 40% gross margin. Keep the sign convention consistent and use costs as positive amounts when the model subtracts them. A constant ratio is less persuasive when product mix, purchasing terms or capacity change.
Driver-based modeling separates quantity from economics. Ten average FTE at annual compensation of 60,000 produce 600,000 of salary before employer costs, bonuses and dated hiring effects. Price × volume can distinguish a price rise from additional units. Check that staffing and production capacity support forecast activity; personnel schedule details explain how the product handles staffing timing.
Link dependent lines and use schedules for timing
A linked line recalculates from its source instead of repeating a copied number. For a simplified annual case, receivables ≈ credit revenue × DSO ÷ 365. Revenue of 12 million and 45 days imply about 1.48 million of receivables. This steady-state approximation may hide seasonality or a change in collections; the sales basis and calendar must fit the business.
Depreciation follows an asset’s cost, useful life and in-service timing. Interest follows debt balances, rates and borrowing or repayment dates. These schedules connect profit with assets, debt and cash. Avoid counting the same investment or expense twice, and review loops before linking outputs back into inputs. The linked-item reference explains eligible dependencies and cycle handling.
Direct inputs, overrides and adjustments have different purposes
A direct input can replace a driver calculation when a known amount is better evidence. Record why the exception exists, which period it covers and when the ordinary method should resume. Overwriting an output without understanding its source can remove the relationship you intended to keep. The direct-input and override reference identifies editable lines and derived totals.
A reported-to-adjusted bridge answers a different question: how do identified changes alter the reported result? Keep each adjustment separate, state whether it is a normalization or a continuing pro-forma effect, and reconcile its contributions. The adjustment reference documents that bridge. An adjustment is not a substitute for changing the recurring forecast assumption.
Keep scenario assumptions persistent; isolate What-If effects
A scenario retains a coherent alternative set of assumptions across the forecast. A downside can combine slower sales growth with later customer payments while leaving unrelated assumptions unchanged. Define each case’s business logic before choosing rates. The financial model scenario-analysis guide explains Base, Upside and Downside and how to compare their effects.
The scenario reference explains inheritance and scenario-specific changes in BalanceCheat. What-If analysis instead isolates discrete temporary changes or transaction effects, such as a financed equipment purchase. Its removable transaction layer lets you examine the effect without replacing the persistent operating case.
Match periods to the assumptions you can support
Annual assumptions can establish a strategic plan. Monthly sources better expose seasonal sales, hiring and payment timing; weekly sources can be useful for shorter cash cycles. Dividing an annual total into equal periods produces a distribution, not new evidence about the business. Do not imply precision that the underlying assumptions cannot support.
Choose monthly financial modeling or weekly financial modeling when the timing matters. The period and source reference explains fiscal boundaries and how different views derive from a controlling source. After structuring the assumptions, use financial model analysis to test the resulting margins, cash and dependencies in the connected three-statement model.
Frequently asked questions
What are the main financial modeling methods?
Explicit amounts, growth from a prior value, percentages of a relevant base, operational drivers and linked schedules. Choose a method for each line based on its economic cause, evidence and required timing.
When is driver-based modeling more useful than growth?
When separate operational assumptions explain the outcome: price and volume, staffing and compensation, or sales and collection days. Growth is a useful starting estimate when that detail would not improve the decision.
Can every BalanceCheat line use every method?
No. Supported methods depend on the line and modeling mode. The Handbook documents available methods, eligible references, direct inputs and period-specific behavior.
Are scenarios and What-If transactions interchangeable?
No. Scenarios preserve alternative assumption sets. What-If isolates identifiable, reversible transaction effects within a selected case.