20 principles for good spreadsheet practice

The Institute of Chartered Accountants in England and Wales (ICAEW) published Twenty principles for good spreadsheet practice . The core principle is that organizations choose the standard for their spreadsheets and stick to it. The FAST Standard – which is also applied by VALUARIS – was the first standard for financial modeling to be officially recognized by the ICAEW.

The principles are directed to businesses, for which spreadsheets play an important role, as well as to accountancy practices. As a result, I expect what standards will continue to gain in importance in financial modeling and probably in other countries a similar guidance will be established. The ICAEW does not prescribe any specific standard – for example also an internally developed standard may be sufficient. Nevertheless, the official recognition of the FAST Standard makes it very likely in my opinion that this standard will be established as a global standards for financial models.

The Institute does not only provide guidance in its principles on spreadsheet design and appropriate risk control. Also the integration of spreadsheets within the organization and the processes for building models are regarded as equally important. Further explanations of the principles and illustrative examples are included in the appendix.

The 20 principles (Twenty principles for good spreadsheet practice) are listed below:

The spreadsheet’s business environment

1. Determine what role spreadsheets play in your business, and plan your spreadsheet standards and processes accordingly.
2. Adopt a standard for your organization and stick to it.
3. Ensure that everyone involved in the creation or use of spreadsheets has an appropriate level of knowledge and competence.
4. Work collaboratively, share ownership, peer review.

Designing and building your spreadsheet

5. Before starting, satisfy yourself that a spreadsheet is the appropriate tool for the job.
6. Identify the audience. If a spreadsheet is intended to be understood and used by others, the design should facilitate this.
7. Include an ‘About’ or ‘Welcome’ sheet to document the spreadsheet.
8. Design for longevity.
9. Focus on the required outputs.
10. Separate and clearly identify inputs, workings and outputs.
11. Be consistent in structure.
12. Be consistent in the use of formulae.
13. Keep formulae short and simple.
14. Never embed in a formula anything that might change or need to be changed.
15. Perform a calculation once and then refer back to that calculation.
16. Avoid using advanced features where simpler features could achieve the same result.

Spreadsheet risks and controls

17. Have a system of backup and version control, which should be applied consistently within an organization.
18. Rigorously test the workbook.
19. Build in checks, controls and alerts from the outset and during the course of spreadsheet design.
20. Protect parts of the workbook that are not supposed to be changed by users.

In the following video a summary of the presentation event is shown:

I am delighted that the FAST Standard, which is supported and applied by us, has been received this official recognition and I hope that my summary was helpful.

Learn more about the FAST Standard or get our VALUARIS Discounted Cash Flow Model^©:

[button link=\” http://valuaris.ch/valuaris-discounted-cash-flow-model/\” color=\”#E8213E\” text=\”#FFF\” style=\”medium flat rounded white-text-button\”]Valuaris DCF Model – built according to the FAST Standard[/button]