Building Financial Models with AI

Learn how to build sophisticated financial models with dynamic scenario planning using AI assistance in Google Sheets and Excel.

Why Financial Modeling Matters

Financial modeling is essential for business planning, fundraising, and strategic decision-making. Whether you're creating a startup pitch deck, planning your company's growth, or evaluating investment opportunities, a well-built financial model gives you clarity and confidence.

Traditional financial modeling is time-consuming and error-prone. With Ardin's AI assistance, you can build comprehensive models in a fraction of the time while maintaining accuracy and best practices.

The Three-Statement Model

The foundation of financial modeling is the three-statement model, which includes:

• Income Statement (P&L): Revenue, expenses, and profitability
• Balance Sheet: Assets, liabilities, and equity at a point in time
• Cash Flow Statement: Cash inflows and outflows

These three statements are interconnected. Changes in one statement flow through to the others. For example, net income from your P&L affects retained earnings on your balance sheet, which in turn impacts your cash flow.

Scenario Planning: Conservative, Base, Aggressive

One of the most powerful features of a good financial model is scenario analysis. Instead of predicting a single future, model multiple scenarios:

• Conservative: Slower growth, higher costs, longer sales cycles
• Base Case: Most likely outcome based on current trends
• Aggressive: Optimistic growth, better efficiency, favorable market conditions

Building Dynamic Scenarios

With Ardin, you can create scenario toggles that update your entire model:

1. Create an "Assumptions" sheet with key variables
2. Add scenario columns for Conservative, Base, and Aggressive
3. Use data validation to create a scenario selector dropdown
4. Reference the selected scenario throughout your model

Ask Ardin: "Add scenario planning with toggle switches for Conservative, Base, and Aggressive assumptions." It will set up the entire framework with proper cell references.

Key Assumptions to Model

Your financial model is only as good as your assumptions. Here are critical variables to include:

Revenue Drivers

• Customer acquisition rate (monthly new customers)
• Average revenue per customer (ARPC)
• Churn rate (monthly or annual)
• Pricing changes over time
• Seasonal variations

Cost Structure

• Cost of goods sold (COGS) as % of revenue
• Headcount plan by department
• Salary and benefits per role
• Marketing and sales spend
• Infrastructure and software costs

Common Financial Modeling Pitfalls

Avoid these common mistakes when building financial models:

• Circular References: When formulas reference each other in a loop
• Hard-Coded Numbers: Values typed directly into formulas instead of cell references
• Inconsistent Time Periods: Mixing monthly and annual figures
• Overly Complex Formulas: Making models impossible to audit or understand
• No Error Checking: Failing to validate that statements balance correctly

Ardin automatically checks for these issues and suggests corrections, making your models more reliable and maintainable.

Advanced Techniques

Once you've mastered the basics, explore these advanced modeling techniques:

Cohort-Based Revenue Modeling

Instead of modeling total revenue, track each customer cohort separately to account for different retention curves and expansion revenue patterns.

Working Capital Analysis

Model how changes in accounts receivable, inventory, and accounts payable affect your cash position. This is critical for businesses with long payment cycles.

Sensitivity Analysis

Use data tables to see how changes in key variables (like churn rate or CAC) impact your outcomes. This helps identify which metrics matter most.

Next Steps

Start building your financial model today with Ardin's AI assistance. Whether you're modeling a new business, planning a fundraise, or analyzing an acquisition, Ardin helps you build professional-grade models in minutes instead of days.