finit - driver based forecasting 021216
TRANSCRIPT
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Driver Based Forecasting
February 12, 2016
Carla Cwiertnia
©2016
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Finit EPM Services
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Full Cycle Implementations
Upgrades
Dedicated Support
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Why is Finit here?
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Finit takes pride in being a company of makers and Doers; people who dig in and get their hands dirty
We make and deliver personalized financial reporting solutions and experiences
…Not Company to Company, but Person to
Person
By listening, questioning, and analyzing
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The Finit Family
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Fully aligned with our clients, not just bottom line $
No debt or external ownership
Work with Finit employees, no subcontractors
Compensationbased on CLIENT SATISFACTION
PRIVATELY OWNED
CLIENT SATSIFACTION
NOSUBCONTRACTORS
DEBT FREE
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Finit Values
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Our values on which we ask you to provide consultant feedback:
• Approach & Collaboration
• Integrity & Honesty
• Client Betterment
• Self Betterment
• Colleague Betterment
• Finit Betterment
• Work Effectiveness
• Impact & Innovation
• Proactiveness & Passion
Service Solutions Betterment
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Finit Customer Success
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Our values, culture, and approach to becoming a trusted advisor to our
customers has led to
100% customer success
for every Finit client (250+) and for every Oracle Hyperion project (500+)
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Some Finit Customers
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Questions
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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
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©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!
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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
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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
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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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• Overhead expenses are often associated with headcount
Drivers to Plan for Overhead (cont’d)
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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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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
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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
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Contact Information &Future Webinars
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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
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©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