1. Spreadsheet Engineering
“Training in spreadsheet modeling improves both the efficiency and effectiveness with which analysts use spreadsheets”
Steve Powell, Dartmouth College

3. Common Spreadsheet Problems
1. Erroneous formulae:
formula copied wrong or by accident
>> Relative versus Absolute references!
referenced original cells have been deleted or moved
inappropriate or incomplete set of cells included in a range name
incorrect use of a function

4. Common Spreadsheet Problems
2. Data input errors:
values entered over formulas
same assumption value is entered in different places in the model
inappropriate values are entered
3. Assumptions are not documented or accessible to the user
4. A key factor or relationship has been omitted from the model

5. “Good” Spreadsheet Programming Techniques
Never put a constant in a formula: document all numbers in their own cells
Design the workbook to include sections for assumptions and inputs, output reports, data structures, model documentation and intermediate calculations
Use range names
Test your model before using it
Protect cells that contain formulas
Use macros to automate key operations
Use influence diagrams to develop model

6. Building Influence Diagrams
Start with a key output
What single measure will decision-maker use to assess the success of the project?
Decompose the output measure into a small set of variables that determine it directly
Take each influencing variable and repeat this process of decomposition
Identify input data and decisions as they arise
Make sure that each variable appears only once

7. Symbols Needed in Influence Diagrams
Objective
Variable
Fixed Input Parameter
Random Input Parameter
Decision

8. Create an influence diagram for a pro forma Income Statement
What should be the key output to start the diagram?
What assumptions will you need to make?

9. Designing a Spreadsheet
Sketch the spreadsheet
Influence diagrams
Organize into modules
Algebraically outline parts of logic
Start small: design, build and test one module of the model at a time
Isolate input parameters
Design for use:
Create outputs that answer the questions the user wants to address (e.g. graphs)
Place key results close to input assumptions

10. Designing a Spreadsheet
Keep it simple
Break down long formulas into simpler intermediate calculations
Easier to spot errors & documents logic
Design for communication
Informative labels
Formatting options
Document important data and formulas
Cell comments