Three-Statement Modelling for FP&A Pros to Avoid Complex Builds & Forecast Errors with Chris Reilly

In this republished episode of the Financial Modeler’s Corner, host Paul Barnhurst revisits the intricate world of financial modeling with returning guest Christopher Reilly. The conversation centers around what is necessary to build robust financial models, highlighting the importance of three-statement models and cash flow forecasting. The episode is filled with practical insights, advanced techniques, and professional experiences that underscore the significance of simplicity, accuracy, and best practices in financial modeling.

Christopher Reilly is a seasoned financial modeler with extensive experience in consulting, private equity, and financial modeling education. Starting his career during the financial crisis, Chris worked on high-profile bankruptcies such as Lehman Brothers and Rescap. His journey took him from a senior analyst role at Hilton Worldwide to a middle-market private equity firm, and eventually led to founding his own financial modeling education business. Today, he focuses on teaching and building financial models, with his work being featured by Wharton Online, Wall Street Prep, and LinkedIn Learning, among others.

Expect to Learn:

• The importance of simplicity in financial models and how over-complicating can hinder their effectiveness.
• Practical steps and considerations for building robust three-statement financial models.
• Tips for auditing models to ensure accuracy and integrity.
• How to use advanced Excel functions and shortcuts to enhance modeling efficiency.
• Insights into the role of AI in financial modeling and how it may shape the future of the profession.

Here are a few quotes from the episode:

• “All models are wrong, some are useful, and if it’s too complicated, it’s not useful.” - Chris Reilly
• “AI won’t replace modelers, but it will complement us by improving assumption accuracy and reducing bias.” - Chris Reilly
• “Use the BASE structure: Beginning, Addition, Subtraction, Ending, it’s the easiest way to audit support schedules.” - Chris Reilly

Follow Christopher:

• Website - https://www.financialmodelingeducation.com/
• LinkedIn - https://www.linkedin.com/in/chris-reilly-mission-capital/

Follow Paul:

• Website - https://www.thefpandaguy.com  
• LinkedIn - https://www.linkedin.com/in/thefpandaguy 
• YouTube - https://www.youtube.com/@thefpandaguy

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In today’s episode:

[02:13] - Horror Story

[03:46] - Why simple models are most effective

[04:52] - Christopher’s career journey

[08:07] - Passion for teaching financial modeling

[11:31] - Why finance pros need 3-statement modeling

[14:13] - Getting started with a 3-statement model

[26:18] - Setting Up the Financial Plumbing

[32:01] - Tips for error checks & model integrity

[38:26] - Must-know Excel formulas & functions

[46:16] - How AI may shape financial modeling

[49:13] - Chris Reilly’s Financial Modeling Courses