Innovate FP&A with driver-based planning
Learn how leading companies are using a detailed framework of business drivers to improve the speed and accuracy of budgets and forecasts.
Business today is moving at warp speed, with new risks and opportunities seemingly emerging by the day. But is your financial planning and analysis (FP&A) team keeping up?
For many companies today, the answer is a solid “not yet,” as top-heavy forecasting drills and laborious bottoms-up budgeting often mean it can take months to even identify all those incoming risks and opportunities—let alone map out a strategic response. Getting a competitive edge today is increasingly reliant on getting the FP&A team to move faster. And that’s why a number of leading companies are starting to innovate their traditional FP&A functions with a dynamic new approach called driver-based planning, as we outline in a comprehensive new KPMG report, “Driver-based planning: Elevating FP&A.”
With driver-based planning, cross-functional experts develop a multilevel framework of the company’s essential, data-driven business drivers, and that framework is then embedded directly into the enterprise performance management (EPM) and reporting systems. Over time, this enhanced driver-based framework can steadily improve the speed and accuracy of the forecasting process while liberating the finance team from labor-intensive rearview mirror tasks (an all-night data roll-up, anyone?) so that they can spend more time on identifying new value-generating opportunities for the business.
The business imperative now is to transform the finance team from that task-based operating unit to a capability-enabled enterprise partner—elevating staff to focus on delivering larger, value-generating financial insights and companywide contributions.
From the KPMG report, "Driver-based planning: Elevating FP&A."
The “driver tree” framework
Conceptually, the idea of identifying key business drivers and using them to plan your business … well, you’re doing that today, right?
The sales team emails their weekly spreadsheet, the operations data is in the cloud, and the relevant inputs from HR are in a secure silo. And somewhere in there are all of the key levers to your business—in no particular order, of course. Now you just need a lot of people and a lot of time to collect and sort the data, assess its value and impact, prioritize it, reconcile any discrepancies, and update the budgets and forecasts. See you in a few months!
Instead, advanced driver-based planning fully innovates that still-too-common FP&A scenario by creating a single framework of the company’s key inputs that sits within the EPM—a single source of truth for all reporting, planning, and forecasting. Crucially, this enhanced, unified framework connects finance with the essential drivers from across the company—operations, sales and marketing, HR, and more—using agreed-to inputs and values that are vetted by cross-functional teams.
Here’s a closer look at three key attributes of an advanced driver-based framework:
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How to get started
Successfully adding innovation to FP&A doesn’t happen overnight. Executing on the driver-based model requires thoughtful planning, realistic goals and timelines, and plenty of attention to change management.
Our KPMG teams have been working with leading companies over the past few years to help them build and implement driver-based frameworks and establish leading practices for their companies. Here are some of the key steps we have identified:
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Most companies can get started on driver-based planning with existing company historical data. Over time, companies can add additional internal data while also testing the value of external data—for example, foot traffic near stores or weather data that might affect supply chains. These additional drivers are very often the minutiae, three or four levels deep in a driver framework, that deliver increased accuracy and tangible additional value.
A framework for change
Leading-edge technologies like predictive modeling, AI and machine learning, and enhanced data and automation are no longer exciting “new” tools. They are proven commodities that are delivering significant competitive advantages to the companies that understand their potential to transform and elevate their business teams and operations.
Driver-based planning gives the FP&A team a roadmap for that transformation by automating a wide range of time-consuming legacy tasks, streamlining data management, and improving the speed and accuracy of essential company forecasts. And, in the process, moving the finance team from chief taskmaster to a true value-generating business partner.
Explore more insights and opportunities around innovation:
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Enabling next gen driver-based planning
Move your finance team from task-master to value-generating partner. Learn how to elevate financial planning & analysis.
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The future of business planning and analysis
Broaden the scope of traditional financial planning and analysis (FP&A) to business planning and analysis (BP&A).
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Driver acceleration ahead - Insurance Industry Spotlight
Hear from KPMG professionals on how you can explore and use business drivers to potentially improve results.
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