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Driver Based Forecasting
February 12, 2016
Carla Cwiertnia
©2016
Finit EPM Services
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Finit takes pride in being a company of makers and Doers; people who dig in and get their hands dirty
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Finit Values
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Our values on which we ask you to provide consultant feedback:
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Page 6
Our values, culture, and approach to becoming a trusted advisor to our
customers has led to100% customer success
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Some Finit Customers
Questions
Upcoming Webinars
Page 9
February 19th - What would happen if I did...in HFM: greatest hits and disasters – Chris Barbieri
February 26th - Intro to Planning Part II - Cindy Eichner
©2016
About the Presenter
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Carla Cwiertniaccwiertnia@finitsolutions.com
• 15 + Years Experience with Hyperion Planning and Essbase
• Member of Planning and Essbase Practice Team
• Member of Finit Answers Team• Oracle Hyperion Planning and
Essbase Certified Consultant• Loves Hawaii!
©2016
Agenda
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• Driver Based Forecasting• Challenges and Types of Drivers• Key Steps in Creating a Driver Based
Forecast• Driver Based Forecasting Examples• Contact Information and Future Webinars
Driver Based Forecasting
©2016
What is a driver?
• Cause and effect•What an organization does• Align with business processes• Inputs – not outputs•May not be controllable
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©2016
How do we use drivers?
• Budget / Plan / Forecast• Revenue Analysis• Cost Analysis• Profitability and Pricing• Risk Analysis• Strategic Decisions• Process Improvement
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©2016
What is driver based forecasting?
• Identifying key metrics• Global Drivers• Local Drivers•Model impact of variables• Focus on areas that drive success
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©2016
What are the benefits of driver based forecasting?
• ‘What if’ Scenarios for changing drivers• Focus on what drives the organization• Standardize forecast process• Predict labor expenses more accurately• Create forecasts more easily
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©2016
How will Drivers Improve Forecast Accuracy?
•Manage changes efficiently• Provides consistency• Update forecasts quickly and more often• Strategic advantage
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©2016
Challenges and Types of Drivers
©2016
Challenges to Driver Based Forecasting
• Identifying key drivers• Differing Opinions• Determining the number of drivers needed• Identifying the level of detail required
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©2016
Types of Drivers
• Labor Cost Drivers• Headcount • Tax Rates• Benefit Rates
• Unit Drivers• Pounds• Units Sold• WIP Units• Volume
• Sales Drivers• Gross Sales• Price• Revenue %• Net Sales• Margin %
©2016
Types of Drivers (cont’d)
• Occupancy Drivers• Square Footage• Price per Square Foot
• Financial Drivers• # of Transactions• Market Share / Attrition
• Technology Drivers• Headcount• Licenses• # of Computers• # of Servers
Key Steps in Creating a Driver Based Forecast
©2016
• What drives revenue and cost• Metrics for overhead• Apply rates and caps• Use brackets to apply rates• Standardize the forecast process
Key Steps in Creating a Driver Based Forecast
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©2016
• Price• Units / Volume• Supply & Demand• Margin• Inventory• Fixed Cost• Variable Cost• Labor• Material
Key Drivers of Revenue and Cost
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©2016
• Key areas of overhead• IT• Finance• Human Resources
• Overhead often gets allocated by these methods:• Headcount• FTE• Units Sold• Labor Hours
Drivers to Plan for Overhead
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©2016
• Overhead expenses are often associated with headcount
Drivers to Plan for Overhead (cont’d)
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©2016
Travel Driver Examples
• Travel Expense Drivers• Type – Domestic, International, etc.• Average Cost per Flight• Average Cost per hotel night• Average Cost per rental car day
• Airfare Expense = Average Cost per Flight * number of flights• Hotel Expense = Average cost per hotel night *
number of nights
©2016
Travel Driver Examples (cont’d)
©2016
Travel Driver Examples (cont’d)
©2016
Using Drivers to Apply Rates and Caps
• Labor Drivers• Benefits Rate• 401K Rate• Merit Increase Rate• Payroll Tax Rate• Medicare Tax Rate• Social Security Tax Rate• Social Security Tax Cap• Medicare Tax Cap• Unemployment Tax Rate• Unemployment Tax Cap
©2016
Using Drivers to Apply Rates and Caps
• Social Security Tax = If YTD Gross Income <= Social Security Tax Cap, Then (Gross Income * Social Security Tax Rate)
©2016
• Income Tax Brackets – Salary Cap and Rate Drivers• The Income Tax Rate applied depends on Base Salary
Driver Brackets
©2016
• Proactive vs. reactive• Align drivers with actual processes•More efficient and quicker to make
changes
Standardizing the Forecast Process
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Summary
©2016
Summary
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• Drivers are what the organization does• Identify key metrics and get consensus•Model how processes are impacted by
variables• Standardize
Contact Information &Future Webinars
©2016
Thank You for Attending!
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Today’s Presenter:Carla Cwiertnia
ccwiertnia@finitsolutions.com
General Questions:Greg Barrett
gbarrett@finitsolutions.com
Joe Mizerk
jmizerk@finitsolutions.com
Copy of the slides or Recording:Email us for a copy of the slides or a link to the recording
insights@finitsolutions.com
Past webinars:
www.finitsolutions.com/webinars
Follow us on Twitter for updates:@Finit_Solutions
©2016
Upcoming Webinars
Page 38
What would happen if I did...in HFM: Greatest Hits and Disasters
Friday, February 19th, Noon ESTChris Barbieri
Intro to Planning Part IIFriday, February 26th, Noon EST
Cindy Eichner
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