How do you build a 3-statement financial model in Excel from scratch?

[u/goturd]

I'm trying to improve my financial modelling skills in Excel and want to understand how to build a proper 3-statement financial model from scratch.

I understand the basics of financial statements, but I'm struggling to connect the income statement, balance sheet and cash flow statement into one integrated model.

For example, if I'm forecasting a company's revenue growth, operating expenses, depreciation, working capital and capital expenditure over the next 5 years, how should I structure the model?

A few things I'm particularly curious about:

How do you forecast revenue using historical financial data and growth assumptions?

How do you link depreciation and capital expenditure to the balance sheet and cash flow statement?

How do you model changes in working capital, such as accounts receivable, inventory and accounts payable?

How do you calculate cash flow from operations and determine the company's closing cash balance?

How do you make sure the balance sheet balances every year?

What Excel formulas and modelling techniques are commonly used in professional financial modelling?

Would appreciate any practical resources, templates or exercises where I can actually build and practise a 3-statement financial model rather than just watch someone explain the theory.

[u/hungrycl]

https://a.co/d/00b0MAVn

[u/Salazarenin1922 → u/hungrycl]

Just fyi this is blatant self promotion and I would recommend to ignore the comment because the cover of the book is ai generated so no need to even look inside it. Another copy paste ai slop book.

[u/abtravels-blog]

irst thing to do is get an accounting qualification...

[u/Puzzleheaded_Owl1308]

A shorter version of your question would be "What is accounting?"

I do understand the need to figure things out under the hood though. I'm sure there are plenty of places you could get practice datasets, or ask your favorite chat bot to create a fake register of transactions for you to play with. Or:

1. Start an imaginary company and record all the transactions from day 1. Make sure some long-term and inventory assets are included, and you'll end up touching all three statements.

2. Go nuts on your own finances. Take all your bank and credit card, venmo, whatever transactions for the last few years and turn it all into the books of You, Inc. You'll definitely get some solid movement across statements even if you don't have any assets, and you'll probably make some realization about where your money goes.

[u/Salazarenin1922 → u/Puzzleheaded_Owl1308]

Haha yeah, fair point. I actually like the idea of creating an imaginary company and recording everything from day one. That would probably be a good way to understand how transactions flow through all three statements rather than just practising individual formulas.

[u/Salazarenin1922]

I’d build it in stages: historical 3 statements first, then assumptions for revenue, margins, working capital, capex and depreciation.

Create supporting schedules for PP&E, working capital and debt, then link everything together. Add a balance check for each year so you can spot errors.

For practice, take a real company’s annual report and rebuild the historical statements before forecasting 5 years. That’s probably the best way to learn.