check-model

name

check-model

description

Debug and audit financial models for errors — circular references, broken formulas, hardcoded overrides, balance sheet imbalances, cash flow mismatches, and logic gaps. Use when a model isn't tying, producing unexpected results, or before sending to a client or IC. Triggers on "debug model", "model check", "audit model", "model won't balance", "something's off in my model", "check my model", "QA model", or "model review".

Model Checker

Workflow

Step 1: Ingest the Model

• Accept the user's Excel model (.xlsx or .xlsm)
• Identify model type: DCF, LBO, merger, 3-statement, comps, returns, or custom
• Map the structure: which tabs exist, how they're linked, where inputs vs. outputs live

Step 2: Structural Checks

Tab & Layout Review:

• Are inputs clearly separated from calculations?
• Is there a consistent color-coding convention? (blue = input, black = formula, green = link)
• Are there hidden tabs or rows that could contain overrides?
• Is the model flow logical? (assumptions → IS → BS → CF → valuation)

Formula Consistency:

• Check for hardcoded numbers inside formulas (partial hardcodes)
• Check for inconsistent formulas across row/column ranges (should be the same formula dragged across)
• Identify any #REF!, #VALUE!, #N/A, #DIV/0! errors
• Flag cells that are formatted as formulas but contain hardcoded values

Step 3: Integrity Checks

Balance Sheet:

• Total Assets = Total Liabilities + Equity (every period)
• If imbalanced, quantify the gap and trace where it breaks
• Check that retained earnings rolls forward correctly: Prior RE + Net Income - Dividends = Current RE
• Verify goodwill and intangibles flow from acquisition assumptions (if M&A model)

Cash Flow Statement:

• Ending cash from CF = Cash on BS (every period)
• Operating CF + Investing CF + Financing CF = Change in Cash
• D&A on CF matches D&A on IS
• Capex on CF matches PP&E rollforward on BS
• Working capital changes on CF match BS movements (AR, AP, inventory)

Income Statement:

• Revenue builds tie to segment/product detail
• COGS and gross margin are consistent with assumptions
• Tax expense = Pre-tax income × tax rate (check for deferred tax adjustments)
• Share count ties to dilution schedule (options, converts, buybacks)

Circular References:

• Check for circular references (interest expense → debt balance → cash → interest)
• If intentional (common in LBO/3-statement models), verify the iteration toggle works
• If unintentional, trace the loop and suggest how to break it

Step 4: Logic Checks

Reasonableness:

• Do growth rates make sense? (100%+ revenue growth without explanation = red flag)
• Are margins within industry norms? Flag outliers
• Does terminal value dominate the DCF? (>75% of EV from TV is a yellow flag)
• Are projections hockey-sticking unrealistically?
• Does EBITDA growth compound to an absurd number by Year 10?

Sensitivity & Edge Cases:

• What happens at 0% growth? Negative growth?
• Does the model break with negative EBITDA?
• Do leverage ratios go negative or exceed realistic bounds?
• Are there any divide-by-zero risks?

Cross-Tab Consistency:

• Do linked cells actually match their source? (copy-paste errors are common)
• Are date headers consistent across all tabs?
• Do units match (thousands vs. millions vs. actuals)?

Step 5: Common Bugs by Model Type

DCF:

• Discount rate applied to wrong period (mid-year vs. end-of-year convention)
• Terminal value not discounted back correctly
• WACC uses book values instead of market values
• FCF includes interest expense (should be unlevered)
• Tax shield double-counted

LBO:

• Debt paydown doesn't match cash sweep mechanics
• PIK interest not accruing to debt balance
• Management rollover not reflected in returns
• Exit multiple applied to wrong EBITDA (LTM vs. NTM)
• Fees and expenses not deducted from Day 1 equity

Merger Model:

• Accretion/dilution uses wrong share count (pre- vs. post-deal)
• Synergies not phased in correctly
• Purchase price allocation doesn't balance
• Foregone interest on cash not included
• Transaction fees not in sources & uses

3-Statement:

• Working capital changes have wrong sign convention
• Depreciation doesn't match PP&E schedule
• Debt maturity schedule doesn't match principal payments
• Dividends paid exceed net income without explanation

Step 6: Report

Generate a model audit report:

Summary:

• Model type and overall assessment (Clean / Minor Issues / Major Issues)
• Number of issues found by severity

Issue Log:

#	Tab	Cell/Range	Severity	Category	Description	Suggested Fix
1			Critical/Warning/Info	Formula/Logic/Balance/Hardcode

Severity Definitions:

• Critical: Model produces wrong output (BS doesn't balance, formulas broken)
• Warning: Model works but has risks (hardcodes, inconsistent formulas, edge case failures)
• Info: Style and best practice suggestions (color coding, layout, naming)

Step 7: Output

• Issue log table (in chat or Excel)
• Annotated model with comments on flagged cells (if user provides the file)
• Summary assessment with fix priority

Important Notes

• Always check the BS balance first — if it doesn't balance, nothing else matters until it does
• Hardcoded overrides are the #1 source of model errors — search aggressively for them
• Sign convention errors (positive vs. negative for cash outflows) are extremely common
• Models that "work" can still be wrong — sanity-check outputs against industry benchmarks
• If the model uses VBA macros, note any macro-driven calculations that can't be audited from formulas alone
• Don't change the model without asking — report issues and let the user decide how to fix