finit - driver based forecasting 021216
TRANSCRIPT
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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Questions
Upcoming Webinars
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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 Cwiertnia
• 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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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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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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• 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)
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Travel Driver Examples (cont’d)
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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
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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
General Questions:
Greg Barrett
Joe Mizerk
Copy of the slides or Recording:
Email us for a copy of the slides or a link to the recording
Past webinars:
www.finitsolutions.com/webinars
Follow us on Twitter for updates:
@Finit_Solutions
©2016
Upcoming Webinars
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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