AFP FP&A Guide to Driver-Based Models and Plans

This guide provides an overview of driver-based models and plans in financial planning and analysis (FP&A). It explains how these models utilize a limited number of inputs to forecast various financial outputs by establishing relationships between key operational drivers and anticipated financial outcomes. The guide outlines the benefits of driver-based models, including speed, alignment, focus, and efficiency, while also discussing potential risks such as reliance on historical relationships and the absence of human context in purely formulaic models. It emphasizes the importance of collaboration across departments to ensure accurate identification and validation of drivers. The guide details a structured approach to building these models, which includes defining business needs, identifying key drivers, calibrating relationships, and maintaining model relevance through testing and iteration. Additionally, it highlights the necessity of good data quality and the integration of human judgment in the modeling process to inform decision-making effectively.