Configurable Driver-Based Planning in Power BI

Summary

In this edition, we will be covering the following items:

1. Driver-based planning overview

2. Understanding the balance of flexibility and standardization when designing driver-based planning solutions

3. Laying the foundation for full P&L planning, step-by-step, within Power BI

Formalizing Your Business Logic and Planning Cycle

Finance teams are intimately familiar with the business drivers that shape the direction of the business. They are baked into financial models, projects, budgets, and forecasts but often not explicitly analyzed or rationalized. The goal of driver-based planning in Power BI and Acterys is to streamline and formalize the business logic for each component of the planning cycle:

1. Revenue and COGS: Plan your revenue and COGS by baking in your unit economics by product and service line. Standardize your planning by configuring your revenue model and unit economics directly into your FP&A application with Power BI and Acterys.

2. OPEX: Understand the drivers of your overhead expenses. Are they planned by department, by business unit, or at the organizational level? Are they planned at the GL account level or lower?

3. Headcount Planning (HCM): What drives your workforce planning and labor expenses? How are bonuses structured? Does your company have to factor in stock-based compensation?

4. CAPEX Planning: Does your organization have large fixed expenses? Do you need to factor in capitalization of fixed assets over their useful life? How does your team currently plan for different CAPEX scenarios?

5. Demand Planning: Does your team need to forecast demand to help unify sales and inventory planning? What are the inputs that drive this analysis?

6. Materials Planning: Do you need to forecast materials and parts purchases for manufacturing? Do you have a reliable method to plan for materials requirements based on your forecasts?

Mix-and-Match to Create Custom Planning Solutions

Configuring streamlined solutions does not mean forcing your entire organization into a one-size-fits-all approach. The flexibility of Power BI and Acterys means that different approaches can be used, depending on the situation and the team’s needs.

1. Driver-Based: Your team can plan line items like revenue by forecasting volume and units sold, using Acterys to automatically calculate the revenue implications to either of these inputs.

2. Top-Down Entry: Your team can directly input forecasts at the GL Account level and allocate to underlying sub-accounts appropriately.

3. Bottom-Up Entry: Conversely, your team can enter multiple “child level” accounts and view the aggregated impact consolidated at the GL Account.

Standardizing the Method Behind the Planning Madness

Take an inventory of the planning methodologies that are in place on your team today. How could a streamlined FP&A solution help your team better drive the planning and analytics process? What are the core drivers of your business model and how could your team think more clearly and explicitly about them? Answering questions like these will help you shift your team into a more proactive, intentional approach to the entire FP&A cycle. The more your team plans by specific business drivers, the more valuable your variance analysis will be, because your team will have the ability to pressure-test its forecasts and understand the root causes of variance.

In the Next Newsletter

We will learn more about driver-based revenue planning for different business models.