The manual workaround described here, overwriting formulas, recalculating, then reinserting them, is not a solution. It is a fragile ritual that works only because Excel's iterative calculation engine happens to converge when given the right starting values. For a real estate development model managing monthly cash flows, debt accrual, and a multi-tier funding waterfall, this approach is one accidental edit away from producing silent errors. The model appears stable, but it is not robust.
The core problem is structural. Funding draws are driven by cash deficits, yet those draws themselves change the cash balance and outstanding debt, which in turn affect the deficit calculation in the same period. That is a textbook circular reference. The instinct to break it by seeding static values is understandable, but it masks the underlying instability. Best practice for a deterministic model is to avoid same-period interdependence entirely. The funding need should be calculated based on the cumulative deficit from prior periods, not the current period's cash position. This breaks the loop cleanly: you compute how much cash is needed before the period begins, then apply the waterfall in a strict sequence that does not feed back into itself.
If the model truly requires circular logic, for example, if interest accrues mid-period and changes the draw amount, then iterative calculation with controlled convergence settings is acceptable. But that demands discipline. Set a maximum iteration count and a small convergence threshold. Document the logic explicitly. And never rely on a manual seed-and-reinsert workflow as a production process. That is not modelling; it is hoping.
For anyone building project finance models in spreadsheets, the lesson here is straightforward. Design the funding waterfall so that each period's draws depend only on known inputs from prior periods. If you must use circular references, treat them as a deliberate feature with guardrails, not as a bug you work around by hand. The manual workaround may produce the right answer today, but it will not survive the next change to the cash flow assumptions. Build for resilience, not for ritual.