A financial model audit is often a formal due diligence requirement of investors in major infrastructure transactions. It is an essential part of the process, but it has the potential to come with a hefty price tag.
Understanding how to streamline this process can lead to significant cost savings without compromising quality. In this guide, we’ll unveil key strategies to optimise your financial model audit, ensuring you meet investor due diligence requirements both efficiently and economically.
1. Choose the right financial model auditor
Specialist financial model audit firms are typically cheaper than the large accounting firms, as they are focussed solely on model audit as their core business. This means they will have invested time and effort into providing a refined process.
2. Have a good model
Model auditors will take a view on pricing your audit based on the complexity and quality of the model.
They will often consider a count of complex formulae or take a more subjective view based on its overall structure and layout to determine pricing.
So make sure your model which is well put together in the first place. This is one of the best ways to reduce your financial model audit costs.
3. Build a long-term relationship
If you anticipate a steady stream of transactions in the future, particularly those using a similar financial model, consider bundling these deals into a single procurement process. This approach is highly appealing to a model auditor. They value the certainty of ongoing business and the efficiency gained from reviewing similar models. As a result, the cost of reviewing each subsequent model often significantly decreases. Given these efficiencies, most auditors are inclined to offer considerable discounts.
4. Limit the scope of document review
From an auditor’s perspective, there is a big difference between being asked to review an entire suite of documents for consistency with the model versus a review of specific extracts.
In practice, it is typically the same few sections of key documents that have a bearing on the financial model. If you have clarity on those and request only a review of extracts, the auditor will generally offer a discount.
5. Limit liability
One of the more significant drivers of pricing for a model auditor is the level of liability they need to provide. 5m GBP is standard for a large infrastructure transaction. If lenders do not require this level of cover and you can reduce this limit, most auditors would likely provide a discount. Look out for hidden extras Most auditors charge a premium for extra iterations of their review, above a standard 3-4. These costs can mount up when you least need them.
Note: Gridlines does not believe in iteration-based charging.
In conclusion, navigating the complexities of financial model audits requires careful planning to avoid unnecessary expenses. However, you can avoid these common financial pitfalls by making informed choices.
Selecting the right auditor, simplifying your model, building lasting partnerships, focusing on essential document sections, managing risks smartly, and being alert to unexpected costs are critical steps in preventing overspend.
At Gridlines, we take a pragmatic approach to pricing and would like to discuss how we can provide you with the best possible value model audit solution.
Contact Gridlines today for a tailored, cost-effective solution.
