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AFP FP&A Guide to Driver-based Models and Plans

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

DOWNLOAD THE GUIDE

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