Build a Startup 3-Statement Financial Model

A three-statement model connects three core reports:

• The income statement, which calculates profit or loss over each month
• The cash flow statement, which reconciles beginning cash to ending cash
• The balance sheet, which shows assets, liabilities, and equity at each month-end

Enter these dates in Inputs!B1:G1:

The model must contain exactly these 6 forecast columns. On each of the other 4 tabs, enter =Inputs!B1 in B1 and copy it through G1.

Next, enter the following monthly assumptions on Inputs:

Enter the scalar assumptions in Inputs!I2:J15:

Opening balances precede January 2027, so don’t also record them as January cash flows.

For this compact fixed-asset schedule, Inputs!J6 must remain zero because the schedule doesn’t calculate depreciation on opening assets. The useful life must also be at least 6 months, equal to the full forecast horizon. If a model has opening PP&E, it needs a separate opening-asset schedule that includes the assets’ remaining useful lives and depreciation.

Apply data validation where available:

• Nonnegative numeric values for customers, ARPU, salary, expenses, capex, financing, opening cash, opening receivables, opening payables, opening debt, and opening contributed capital
• A value of exactly zero for opening net PP&E in this example
• A numeric value for opening retained earnings, which may be positive, zero, or negative
• Whole nonnegative numbers for headcount
• Rates from 0% through 100%
• DSO from 0 through 30 days
• A whole-number useful life of at least 6 months
• Principal repayment no greater than beginning debt plus current-month proceeds
• Consecutive month-end dates

Validation can reject ordinary typed entries, but pasted or imported values may bypass it. The formulas below check their inputs where shown. However, they don’t validate the date headers, so confirm the forecast dates manually in Step 9.

The SEC financial-statement guide explains the accounting equation and how income, balance-sheet changes, and operating, investing, and financing cash flows connect. For spreadsheet syntax, consult the Google Sheets function reference.

Use Revenue!A2:A9 for these labels:

1. Opening customers
2. New customers
3. Churn rate
4. Churned customers
5. Ending customers
6. Average customers
7. ARPU
8. Revenue

Enter this opening-customer formula in Revenue!B2:

=IF(AND(ISNUMBER(Inputs!$J$2),Inputs!$J$2>=0),Inputs!$J$2,NA())

Then enter this formula in Revenue!C2 and copy it through G2:

=IF(AND(ISNUMBER(B6),B6>=0),B6,NA())

Enter the remaining formulas in column B and copy them through column G:

Revenue!B3
=IF(AND(ISNUMBER(Inputs!B2),Inputs!B2>=0),Inputs!B2,NA())

Revenue!B4
=IF(AND(ISNUMBER(Inputs!B3),Inputs!B3>=0,Inputs!B3<=1),Inputs!B3,NA())

Revenue!B5
=IF(AND(ISNUMBER(B2),ISNUMBER(B4),B2>=0,B4>=0,B4<=1),B2*B4,NA())

Revenue!B6
=IF(AND(ISNUMBER(B2),ISNUMBER(B3),ISNUMBER(B5),B2-B5+B3>=0),B2-B5+B3,NA())

Revenue!B7
=IF(AND(ISNUMBER(B2),ISNUMBER(B6)),(B2+B6)/2,NA())

Revenue!B8
=IF(AND(ISNUMBER(Inputs!B4),Inputs!B4>=0),Inputs!B4,NA())

Revenue!B9
=IF(AND(ISNUMBER(B7),ISNUMBER(B8)),B7*B8,NA())

For January, the schedule should calculate:

Use Schedules!A2:A5 for:

• Headcount
• Salary per employee
• Payroll
• Other cash opex

Enter these formulas in column B and copy them through G:

Schedules!B2
=IFERROR(IF(AND(ISNUMBER(Inputs!B5),Inputs!B5>=0,MOD(Inputs!B5,1)=0),Inputs!B5,NA()),NA())

Schedules!B3
=IF(AND(ISNUMBER(Inputs!B6),Inputs!B6>=0),Inputs!B6,NA())

Schedules!B4
=IF(AND(ISNUMBER(B2),ISNUMBER(B3)),B2*B3,NA())

Schedules!B5
=IF(AND(ISNUMBER(Inputs!B7),Inputs!B7>=0),Inputs!B7,NA())

The IFERROR wrapper ensures that text pasted into the headcount input returns #N/A instead of allowing MOD to return #VALUE!.

In January, a headcount of 2 at $8,000 per employee produces $16,000 of payroll. Other cash opex is $5,000.

This example treats headcount as an ending monthly input and applies the full monthly salary. If the model needs hire-date precision, it will require a separate hiring schedule.

Fixed assets

Use Schedules!A7:A9 for Capex, Depreciation, and Net PP&E.

Enter these formulas in B7:B9 and copy them through G:

Schedules!B7
=IF(AND(ISNUMBER(Inputs!B8),Inputs!B8>=0),Inputs!B8,NA())

Schedules!B8
=IFERROR(IF(AND(COUNT($B7:B7)=COLUMNS($B7:B7),ISNUMBER(Inputs!$J$12),Inputs!$J$12>=6,MOD(Inputs!$J$12,1)=0),SUM($B7:B7)/Inputs!$J$12,NA()),NA())

Schedules!B9
=IFERROR(IF(AND(ISNUMBER(Inputs!$J$6),Inputs!$J$6=0,COUNT($B7:B7)=COLUMNS($B7:B7),COUNT($B8:B8)=COLUMNS($B8:B8)),Inputs!$J$6+SUM($B7:B7)-SUM($B8:B8),NA()),NA())

Here, the IFERROR wrapper makes malformed useful-life inputs return #N/A. The depreciation formula accepts only whole-number useful lives of at least 6 months, while the net PP&E formula requires opening net PP&E to equal zero.

The model assumes depreciation begins in the acquisition month. January capex of $6,000 with a 36-month life produces:

• Depreciation: $6,000 ÷ 36 = $166.67
• Net PP&E: $6,000 - $166.67 = $5,833.33

This cumulative formula is valid within the six-month forecast because no accepted asset life ends before the forecast does. If you extend the forecast beyond the selected useful life, use asset cohorts so fully depreciated purchases leave the depreciation base.

Working capital

Use Schedules!A11:A14 for DSO, Accounts receivable, AP percentage, and Accounts payable.

Enter these formulas in column B and copy them through G:

Schedules!B11
=IF(AND(ISNUMBER(Inputs!$J$10),Inputs!$J$10>=0,Inputs!$J$10<=30),Inputs!$J$10,NA())

Schedules!B12
=IF(AND(ISNUMBER(Revenue!B9),ISNUMBER(B11)),Revenue!B9*B11/30,NA())

Schedules!B13
=IF(AND(ISNUMBER(Inputs!$J$11),Inputs!$J$11>=0,Inputs!$J$11<=1),Inputs!$J$11,NA())

Schedules!B14
=IF(AND(ISNUMBER(B4),ISNUMBER(B5),ISNUMBER(B13)),(B4+B5)*B13,NA())

The receivables formula approximates AR from current revenue using 30 days per month. This implementation supports DSO from 0 through 30 days. With zero opening AR, that range prevents January receivables from exceeding January revenue.

The January results are:

• Accounts receivable: $12,250 × 30 ÷ 30 = $12,250
• Accounts payable: ($16,000 + $5,000) × 25% = $5,250

A DSO above 30 days requires a collection-lag schedule that includes pre-forecast sales and a consistent opening receivables balance. Don’t extend the current formula to 60- or 90-day DSO assumptions.

Debt

Use Schedules!A16:A21 for:

• Beginning debt
• Debt proceeds
• Principal repayment
• Ending debt
• Annual interest rate
• Interest expense

Enter this formula in Schedules!B16:

=IF(AND(ISNUMBER(Inputs!$J$7),Inputs!$J$7>=0),Inputs!$J$7,NA())

Enter this formula in Schedules!C16 and copy it through G16:

=IF(AND(ISNUMBER(B19),B19>=0),B19,NA())

Now enter these formulas in B17:B21 and copy them through G:

Schedules!B17
=IF(AND(ISNUMBER(Inputs!B9),Inputs!B9>=0),Inputs!B9,NA())

Schedules!B18
=IF(AND(ISNUMBER(Inputs!B10),Inputs!B10>=0,ISNUMBER(B16),ISNUMBER(B17),Inputs!B10<=B16+B17),Inputs!B10,NA())

Schedules!B19
=IF(AND(ISNUMBER(B16),ISNUMBER(B17),ISNUMBER(B18)),B16+B17-B18,NA())

Schedules!B20
=IF(AND(ISNUMBER(Inputs!$J$13),Inputs!$J$13>=0,Inputs!$J$13<=1),Inputs!$J$13,NA())

Schedules!B21
=IF(AND(ISNUMBER(B16),ISNUMBER(B19),ISNUMBER(B20)),(B16+B19)/2*B20/12,NA())

January begins with no debt, receives $30,000, and makes no repayment. The results are:

• Ending debt: $30,000
• Interest expense: (0 + $30,000) ÷ 2 × 12% ÷ 12 = $150

Equity

Use Schedules!A23:A24 for Equity proceeds and Contributed capital.

Enter these formulas in B23:B24 and copy them through G:

Schedules!B23
=IF(AND(ISNUMBER(Inputs!B11),Inputs!B11>=0),Inputs!B11,NA())

Schedules!B24
=IF(AND(ISNUMBER(Inputs!$J$8),Inputs!$J$8>=0,COUNT($B23:B23)=COLUMNS($B23:B23)),Inputs!$J$8+SUM($B23:B23),NA())

Opening contributed capital is $100,000. The $50,000 of equity proceeds in April raises contributed capital to $150,000.

Use Statements!A2:A11 for:

• Revenue
• Payroll
• Other cash opex
• EBITDA
• Depreciation
• EBIT
• Interest expense
• Pretax income
• Tax expense
• Net income

Enter these formulas in column B and copy them through G:

Statements!B2
=IF(ISNUMBER(Revenue!B9),Revenue!B9,NA())

Statements!B3
=IF(ISNUMBER(Schedules!B4),Schedules!B4,NA())

Statements!B4
=IF(ISNUMBER(Schedules!B5),Schedules!B5,NA())

Statements!B5
=IF(AND(ISNUMBER(B2),ISNUMBER(B3),ISNUMBER(B4)),B2-B3-B4,NA())

Statements!B6
=IF(ISNUMBER(Schedules!B8),Schedules!B8,NA())

Statements!B7
=IF(AND(ISNUMBER(B5),ISNUMBER(B6)),B5-B6,NA())

Statements!B8
=IF(ISNUMBER(Schedules!B21),Schedules!B21,NA())

Statements!B9
=IF(AND(ISNUMBER(B7),ISNUMBER(B8)),B7-B8,NA())

Statements!B10
=IF(AND(ISNUMBER(B9),ISNUMBER(Inputs!$J$14),Inputs!$J$14>=0,Inputs!$J$14<=1),MAX(0,B9*Inputs!$J$14),NA())

Statements!B11
=IF(AND(ISNUMBER(B9),ISNUMBER(B10)),B9-B10,NA())

January should produce:

The tax formula recognizes no tax benefit on losses. That’s a deliberate simplification, not a complete tax model.

Use Statements!A14:A27 for:

• Net income
• Depreciation
• Change in AR
• Change in AP
• Cash from operations
• Capex
• Cash from investing
• Debt proceeds
• Principal repayment
• Equity proceeds
• Cash from financing
• Net change in cash
• Beginning cash
• Ending cash

Enter these formulas in B14:B27:

Statements!B14
=IF(ISNUMBER(B11),B11,NA())

Statements!B15
=IF(ISNUMBER(Schedules!B8),Schedules!B8,NA())

Statements!B16
=IFERROR(IF(AND(ISNUMBER(Schedules!B12),ISNUMBER(Inputs!$J$4),Inputs!$J$4>=0),-(Schedules!B12-Inputs!$J$4),NA()),NA())

Statements!B17
=IFERROR(IF(AND(ISNUMBER(Schedules!B14),ISNUMBER(Inputs!$J$5),Inputs!$J$5>=0),Schedules!B14-Inputs!$J$5,NA()),NA())

Statements!B18
=IF(COUNT(B14:B17)=4,SUM(B14:B17),NA())

Statements!B19
=IF(ISNUMBER(Schedules!B7),-Schedules!B7,NA())

Statements!B20
=IF(ISNUMBER(B19),B19,NA())

Statements!B21
=IF(ISNUMBER(Schedules!B17),Schedules!B17,NA())

Statements!B22
=IF(ISNUMBER(Schedules!B18),-Schedules!B18,NA())

Statements!B23
=IF(ISNUMBER(Schedules!B23),Schedules!B23,NA())

Statements!B24
=IF(COUNT(B21:B23)=3,SUM(B21:B23),NA())

Statements!B25
=IF(AND(ISNUMBER(B18),ISNUMBER(B20),ISNUMBER(B24)),B18+B20+B24,NA())

Statements!B26
=IF(AND(ISNUMBER(Inputs!$J$3),Inputs!$J$3>=0),Inputs!$J$3,NA())

Statements!B27
=IF(AND(ISNUMBER(B25),ISNUMBER(B26)),B26+B25,NA())

The January working-capital formulas require opening AR and AP to be nonnegative numbers. Negative or malformed opening values return #N/A.

Copy B14:B15 and B18:B25 through column G.

In later months, working-capital changes must compare the current closing balance with the previous closing balance. Enter these formulas in C16:C17 and copy them through G:

Statements!C16
=IF(AND(ISNUMBER(Schedules!C12),ISNUMBER(Schedules!B12)),-(Schedules!C12-Schedules!B12),NA())

Statements!C17
=IF(AND(ISNUMBER(Schedules!C14),ISNUMBER(Schedules!B14)),Schedules!C14-Schedules!B14,NA())

Enter this formula in Statements!C26 and copy it through G26:

=IF(ISNUMBER(B27),B27,NA())

Once the beginning-cash formulas are in place, copy the B27 ending-cash formula through G27.

January should reconcile as follows:

Use Statements!A30:A40 for:

• Cash
• Accounts receivable
• Net PP&E
• Total assets
• Blank
• Accounts payable
• Debt
• Contributed capital
• Retained earnings
• Total liabilities and equity
• Balance check

Enter these formulas in column B and copy them through G:

Statements!B30
=IF(ISNUMBER(B27),B27,NA())

Statements!B31
=IF(ISNUMBER(Schedules!B12),Schedules!B12,NA())

Statements!B32
=IF(ISNUMBER(Schedules!B9),Schedules!B9,NA())

Statements!B33
=IF(COUNT(B30:B32)=3,SUM(B30:B32),NA())

Statements!B35
=IF(ISNUMBER(Schedules!B14),Schedules!B14,NA())

Statements!B36
=IF(ISNUMBER(Schedules!B19),Schedules!B19,NA())

Statements!B37
=IF(ISNUMBER(Schedules!B24),Schedules!B24,NA())

Statements!B38
=IF(AND(ISNUMBER(Inputs!$J$9),COUNT($B11:B11)=COLUMNS($B11:B11)),Inputs!$J$9+SUM($B11:B11),NA())

Statements!B39
=IF(COUNT(B35:B38)=4,SUM(B35:B38),NA())

Statements!B40
=IF(AND(ISNUMBER(B33),ISNUMBER(B39)),B33-B39,NA())

January provides the first complete check that the statements are connected:

• Total assets: $108,100 cash + $12,250 AR + $5,833.33 net PP&E = $126,183.33
• Liabilities and equity: $5,250 AP + $30,000 debt + $100,000 contributed capital - $9,066.67 retained earnings = $126,183.33
• Balance check: $126,183.33 - $126,183.33 = $0

A zero balance check confirms that the accounting equation reconciles. It doesn’t prove that every assumption, formula, or opening balance is correct.

Use Checks!A2:A4 for:

• Balance check
• Cash roll-forward check
• Minimum-cash funding gap

Enter these formulas in column B and copy them through G:

Checks!B2
=IF(ISNUMBER(Statements!B40),Statements!B40,NA())

Checks!B3
=IF(AND(ISNUMBER(Statements!B26),ISNUMBER(Statements!B25),ISNUMBER(Statements!B27)),Statements!B26+Statements!B25-Statements!B27,NA())

Checks!B4
=IF(AND(ISNUMBER(Inputs!$J$15),Inputs!$J$15>=0,ISNUMBER(Statements!B27)),MAX(0,Inputs!$J$15-Statements!B27),NA())

January should show:

• Balance check: $0
• Cash roll-forward check: $0
• Funding gap: $0, because ending cash of $108,100 exceeds the $50,000 minimum

Under the baseline assumptions, June should end at approximately:

Display reconciliation checks to at least 2 decimal places. If hidden floating-point precision creates a negligible residual, test the displayed result with a tolerance such as $0.01 instead of forcing the statements to balance with a plug.

Run these tests in a copy of the workbook. Restore the baseline input after each test so one case doesn’t affect the next.

1. Baseline balance-sheet reconciliation: Statements!B40:G40 and Checks!B2:G2 should equal zero within $0.01. This tests the accounting identity, not the economic quality of every formula.

2. Baseline cash roll-forward: Checks!B3:G3 should equal zero within $0.01. January must show $100,000 beginning cash + $8,100 net change = $108,100 ending cash. June ending cash should be approximately $89,610.55.

3. Baseline statement linkage: January net income should be $(9,066.67), cash from operations should be $(15,900), and ending cash should be $108,100. The difference between net income and operating cash is explained by $166.67 of depreciation, a $12,250 increase in AR, and a $5,250 increase in AP.

4. Zero churn: Set Inputs!B3 to 0%. January should show 0 churned customers, 15 ending customers, 12.5 average customers, and $12,500 revenue.

5. Zero new customers: Restore 5% churn and set Inputs!B2 to 0. January should show 9.5 ending customers, 9.75 average customers, and $9,750 revenue.

6. Legitimate zero values: Opening debt of 0 with a month containing no proceeds or repayment should produce 0 ending debt and 0 interest, not an error. Zero average customers should produce zero revenue. These are valid numeric zeros rather than missing inputs.

7. Blank input: In an unvalidated test copy, clear Inputs!B2. Revenue!B3 and its dependent formulas should return #N/A, not silently convert the blank to zero.

8. Malformed numeric input: In separate tests, paste abc into Inputs!B4, Inputs!B5, Inputs!B6, or Inputs!J12. The dependent revenue, headcount, payroll, or depreciation formulas should return #N/A. Restore each value before continuing.

9. Invalid opening working capital: Set either Inputs!J4 or Inputs!J5 to -1 or text. The relevant January working-capital change and dependent cash-flow lines should return #N/A. Restore both values to zero.

10. Rates outside their bounds: In an unvalidated copy, enter 105% or -1% for churn, AP percentage, annual interest, or tax. The dependent formulas should return #N/A because the accepted range is 0% through 100%.

11. DSO boundaries: Set Inputs!J10 to 0. January AR should become $0. Restore it to 30 and confirm January AR returns to $12,250. Values below 0, above 30, blank, or text should make DSO, AR, and dependent statement lines return #N/A.

12. Invalid useful life: Set Inputs!J12 to 0, -1, 5, 36.5, blank, or text. Depreciation and net PP&E should return #N/A because the useful life must be a whole number of at least 6 months.

13. Minimum accepted useful life: Set Inputs!J12 to 6. January depreciation should be $1,000 and January net PP&E should be $5,000. June monthly depreciation should be $6,000 and June net PP&E should be $15,000. Restore 36 and confirm January depreciation returns to $166.67.

14. Opening PP&E restriction: Set Inputs!J6 to a nonzero amount. Net PP&E and dependent statement lines should return #N/A because this compact schedule does not depreciate opening assets. Restore the value to zero.

15. Excess principal repayment: Set Inputs!B10 to $31,000. This exceeds January opening debt plus proceeds of $30,000. Repayment, ending debt, interest, and dependent statement lines should return #N/A rather than creating negative debt.

16. Date boundary: Confirm Inputs!B1 is January 31, 2027, Inputs!G1 is June 30, 2027, and every intervening value is the next calendar month-end. There should be exactly 6 forecast columns. This is a manual control because the financial formulas do not test the date headers.

17. Opening-entry review: Confirm opening cash appears once in Inputs!J3 and opening contributed capital appears once in Inputs!J8. Do not record either amount again in Inputs!B11. Confirm Inputs!J6 is zero. Opening retained earnings in Inputs!J9 may be negative if the startup begins with an accumulated deficit. Duplicating both sides could leave the balance check at zero despite an incorrect model.

18. Duplicate and no-match logic: These cases do not apply because the example has no transaction table or lookup. If transactions are added later, define duplicate handling and missing-match behavior before treating the model as controlled.

19. Enum and case sensitivity: These cases do not apply because the model has no status, direction, or other enumerated text field. If one is added, validate the permitted values and use EXACT when capitalization must matter.

20. Cash-needs scenario: Set Inputs!E11, the April equity proceeds, from $50,000 to 0. June cash should fall from approximately $89,610.55 to $39,610.55. Checks!G4 should show a funding gap of approximately $10,389.45 against the $50,000 minimum.

21. Spreadsheet locale: If the workbook uses semicolon separators, replace formula-separating commas with semicolons. The expected outputs should remain unchanged.

These tests are acceptance criteria for the reader to run. They aren’t presented as executed test evidence.

ModelMonkey can assist with this workflow in Google Sheets or Excel. It can read spreadsheet ranges, help with formulas, inspect formula errors, and analyze tabular data. Treat it as an assistant, not as proof that the model is correct.

For this workbook, ask it to inspect these exact ranges:

• Inputs!B1:J15
• Revenue!B1:G9
• Schedules!B1:G24
• Statements!B1:G40
• Checks!B1:G4

Useful requests include:

• “Inspect Statements!B40:G40 and trace any nonzero balance check to its source schedule.”
• “Check Revenue!B2:G9 for inconsistent formulas or formula errors.”
• “Compare the cash roll-forward in Statements!B25:G27 with Checks!B3:G3.”
• “Help extend the monthly formulas without changing absolute references to the scalar assumptions.”

If the workflow presents a preview of proposed spreadsheet changes, review the affected cells and formulas before proceeding. After any change, manually rerun the reconciliation and boundary tests.