Driver-Based Planning

What is Driver-Based Planning?

Driver-based planning is a method of budgeting and forecasting that focuses on key figures and activities, so-called drivers, that impact a company’s financial performance. Examples of drivers include sales volume, which affects both revenue and the cost of goods sold, or the size of the workforce, which affects personnel costs. By working with these drivers in the planning process, you achieve more fact-based and dynamic financial management rather than relying solely on estimates of future outcomes.

Why Driver-Based Planning?

Driver-based planning helps create insights into what impacts company performance, leading to better decision-making within the organization. At the same time, it allows for faster adjustments as you can quickly modify and update the drivers when trends change or to allocate resources more efficiently. Additionally, it enables scenario analysis to simulate different future scenarios based on changes in the drivers. For example, you can easily simulate what happens if sales volume drops by 3% and the dollar exchange rate increases by 10%.

How to Achieve More Accurate Forecasts with Driver-Based Planning

Driver-based planning contributes to more accurate forecasts because the focus is on real factors that can have an impact. By analyzing which factors affect the business the most, such as prices or production, you gain a better overview of the results with higher precision. Continuous monitoring and adjustments also help to ensure that the forecasts are more accurate. This creates dynamic forecasts that can be updated continuously, increasing understanding and control over the business.