What to do when Balance Sheet does not balance?
After 3 hours of anxiety, cursing (under the breath) and a pair of strained eyes, I have finally managed to balance my balance sheet.
Background: I am required to do a valuation model for a single business segment based on a fully consolidated model - so I did the usual extraction, reference etc. Also required to conduct some analysis hence the full model of statements etc.
Following my sweet success, I would like to share my personal steps to folks new to full modelling who have a hard time balancing B/S:
1) Find the net difference of Net Assets and Equity.
2) Eyeball the figure with every line item to see if they are exact match (most encounter would be the lack of cumulative effect in the b/s)
3) If exact match found, you should pat yourself at the back and go rectify the mistake.
4) If Step 2 is unsuccessful, start simplifying your model in steps – take out complex assumptions, eliminate different tax/debt structure, and observe how the net difference changes.
5) Once net difference is eliminated when an item/assumption is removed – Voila! You hit the jackpot and you can go home on time (hopefully).
As said, I find these steps useful for amateurs. If you have a better methodology of balancing the B/S in general, do share!