finit solutions webinar driver based forecasting

Driver Based Forecasting

February 12, 2016

Carla Cwiertnia

©2016

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About the Presenter

Carla [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]

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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

[email protected]

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

[email protected]

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

finit solutions webinar driver based forecasting

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