finit - driver based forecasting 021216

Driver Based Forecasting

February 12, 2016

Carla Cwiertnia

©2016

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About the Presenter

Carla Cwiertnia

[email protected]

• 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!

mailto:[email protected]

©2016

Agenda

• 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

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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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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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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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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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How will Drivers Improve Forecast Accuracy?

• Manage changes efficiently

• Provides consistency

• Update forecasts quickly and more often

• Strategic advantage

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Challenges and Types of Drivers

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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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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 %

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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

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• 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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• Price

• Units / Volume

• Supply & Demand

• Margin

• Inventory

• Fixed Cost

• Variable Cost• Labor

• Material

Key Drivers of Revenue and Cost

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• 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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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

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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

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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)

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• Income Tax Brackets – Salary Cap and Rate Drivers

• The Income Tax Rate applied depends on Base Salary

Driver Brackets

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• Proactive vs. reactive

• Align drivers with actual processes

• More efficient and quicker to make changes

Standardizing the Forecast Process

Summary

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Summary

• 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!

Today’s Presenter:

Carla Cwiertnia

[email protected]

General Questions:

Greg Barrett

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Joe Mizerk

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Copy of the slides or Recording:

Email us for a copy of the slides or a link to the recording

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Past webinars:

www.finitsolutions.com/webinars

Follow us on Twitter for updates:

@Finit_Solutions





http://www.finitsolutions.com/webinars

©2016

Upcoming Webinars

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