An in-depth look at FP&A-related topics that are developed via interviews with finance professionals. Presented as quarterly case studies with practical applications and tools to help you make informed decisions about key FP&A methods.
AFP FP&A Guide to Driver-based Models and Plans
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Driver-based modeling links business drivers to financial outcomes, allowing FP&A teams to come up with more accurate forecasts and drive better decisions.
This guide looks at driver-based modeling and shows how to incorporate it into your plans by looking at the benefits it may have for your organization. You will find:
- Approach to Building the Model
- Identify and Quantify Drivers
- Understand Driver Attributes
- Get the Process Right
For further research on driver-based modeling, check out these three case studies:
APPROACH TO BUILDING THE MODEL
Driver-based models and plans use a small number of inputs to forecast an array of financial outputs. They establish relationships between key operational drivers, external factors and anticipated financial outcomes. Download the guide for more information on benefits which include:
- Speed
- Alignment
- Focus and Efficiency
- Alternative Planning
IDENTIFY AND QUANTIFY DRIVERS
The key drivers of the model should have quantifiably strong predictive ability, measured on or derived from data. What is the right number of drivers? Where should you begin? Download the guide to find out.
UNDERSTAND DRIVER ATTRIBUTES
Identify/quantify drivers and identify and refine data. The more steps and calculations to create a driver, the more the opportunity for error or false readings. Learn more about understanding attributes and find examples of drivers.
GET THE PROCESS RIGHT
Driver-based modeling serves as a strategic approach connecting business drivers with financial outcomes. This method helps FP&A teams by providing a comprehensive framework to derive more precise forecasts, facilitating a deeper understanding of the financial landscape. Get the process right by:
- Defining the model goals
- Defining what is in/out of scope
- Discussing implications
- Creating a communication plan
- Establishing a change management process
Published March 5, 2024