How to create a driver base forecasting withcost centers?

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Driver based forecasting is the forecasting done based on the key activities which are done within a company. In this the operatonal activities are linked to calculate the expense and revenue for the company. Driver based forecastig can be done by first identifying the key business activity or business of the company and accordingly budget the revenue and expense based on the research of the business. The driver based must not be too complicated, it should be made with less of complexity that is we should create drivers for only those important data which impacts the profitability of the company, creatig drivers for unnecessary or small costs which has no impact on profitability will lead to wastage of time and cost in building the drivers. The data used for forecasting should be of use for the business and not just any data should be dump as this would create unnecessary confusion for designing the drivers. The drivers develop should be mostly limited to variable operating expenses of the company as for fixed expenses the drivers wont help because they would be of fixed nature and no help could be derived from drivers. The Business will have to identify key metrics which will drive cost and revenue. Then identify the costs which has direct impact and which has indirect impact. Identify the external and internal drivers that impact the revenue. Than based on different business models drivers can be developed.

jeff jeffy answered 2 years ago

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