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FP&A Guide: Why Finance is Turning to Driver-Based Modeling

  • By Nilly Essaides
  • Published: 1/26/2016
driverbasedmodelFacing greater market volatility, a fast-changing business environment, and a constant push from senior management to improve the planning process, more financial planning and analysis (FP&A) teams are incorporating driver-based modeling into their forecasting methodology. Driver-based modeling links business drivers to financial outcomes, allowing FP&A teams to come up with more accurate forecasts and drive better decisions.

AFP’s latest FP&A Guide, Driver-Based Modeling and How it Works, asks why more companies are incorporating driver-based modeling into their forecasting methodology and looks at the multitude of benefits it may have for your organization. Not only does it help the group increase the frequency and accuracy of the forecast, but it also engenders closer collaboration with business leadership. After all, while finance must lead the effort, it cannot uncover key drivers all by itself. It needs to work directly with business owners to identify the drivers that have the most impact on financial performance.

In addition, driver-based models give finance the ability to better support management decision-making and provide actionable information. As FP&A professionals seek a more strategic role in the organization, they can add tremendous value by providing critical business-driver data to management with plenty of time to take action to change and improve corporate performance.

Driver-Based Modeling and How it Works is available for a limited time to registered users of the AFP site. DOWNLOAD

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