One of the best practices to have with your financial model, something not often done, is to spell out your assumption separately, in its own assumption sheet in the file. Two things I generally see with assumptions in financial model:

1. The assumptions are buried in the individual cells. The reader has to dig through the model to pull out all the various individual assumptions.

2. Assumptions may be spelled out, but they’re listed on individual sheets where the calculations are done. This forces the read to go through many sheets to see the various assumptions.

Neither of these is as good as having all the key assumption laid out in one page. It makes it much easier to review when they’re all together. It provides a check and balance, for you can see where certain assumptions out here out of sync with each other.

However, there’s an even greater blessing - two great additional benefits I see:

1. You can make all your assumption changes right from one particular sheet.

2. It is an additional great quality control check. One of the dangers of spreadsheets can be errors in the spreadsheet. One common error that can come up is an assumption change that is not put in place all the way across where it should be. For example, the days sales outstanding in receivables are put in for most of the 12 months, but somehow August got overlooked. That’s a hard thing to de-bug, and much easier to fix in review, when the assumptions are all on one page and the formulas in the various sheets say the same thing. When you create formulas that way, Excel can automatically put in a flag to let you know when a formula might have changed going across a row.

So, consider using a separate assumption page in your financial model and you’ll be able to assume and your reader will to that this model is in much better working order.