What is Driver Based Planning?

The devil is always in the detail, especially when it’s budgeting time. When we’re in business planning mode we’re looking at what worked well and what didn’t, as well as projecting most likely and stretch scenarios to plan the next year of cash flow. We need the detail to make an action plan to capitalize on opportunities or mitigate risks.
When in planning mode, business leaders want to answer specific questions like: What quantity do we need to sell? How should we price our products? How much stock do I order and when? And to answer these questions, you need historical information and data at the transaction level – data that traditional top-down budgeting struggles to capture and house in a single, consolidated view.
This is where driver-based planning comes in. As an integrated bottom-up approach to budgeting, driver-based budgeting gives business stakeholders visibility into what key business drivers impact the bottom line - so they can best allocate resources and drive performance.
What is driver-based planning?
Driver-based planning is a financial planning process that focuses on the activities (known as ‘drivers’) that impact business performance. It’s based on the idea that certain activities drive business results, and if you can measure these activities, you can influence results. By linking budgets to the resources behind each activity, you can allocate the right mix of resources based on your desired outcome.
For example, if you sell oil you’d most likely want to build a budget that avoids pricing volatility and focuses on how many barrels you can sell. With barrels being your unit of measure, a driver-based model can help you build a sales budget based on how many barrels each sales rep, branch, distributor, or division might sell.
Driver based planning also helps when looking back and reviewing financial performance. For example, if you’ve had a successful sales period, you can drill down into the details to find out why. And when you know why, you’ll know where to focus your efforts to get those results again.
Connecting results to resources
The power of driver-based planning lies in knowing what drivers have the biggest impact on the bottom line. When you know both the financial and non-financial drivers (such as headcount, sales leads, and quantities sold) you can create meaningful budgets that connect resources to results. This allows you to:
- focus resources on the most critical factors that drive success
- see how metrics from different teams across the business roll up to the financial statements
- easily adjust your team’s forecast based on real-time, reliable data
- play out different scenarios to see the financial impact of different decisions.
Examples of driver-based planning in action
![]() Manage demand Find your demand gap by comparing sales forecasts to your inventory and open purchase orders |
![]() Manage lead times Build in enough lead time by looking at campaign periods, sales forecasts, and stock on hand |
![]() Manage headcount Allocate staff workloads by reviewing sales targets, conversion rates, and sales call volumes |
Read more: Why driver driver-based planning is important to modern FP&A
The reality of adopting driver-based planning
While driver-based planning and its benefits sound great in theory, adopting it into your forecasting process can be a challenge. Depending on where your business is on your budgeting and forecasting journey, you might recognize some of these common issues:
Spreadsheets upon spreadsheets
To collect information from across the business, you might have separate spreadsheets for different areas and activities. The data then needs to be shared, imported, and consolidated. This takes up valuable time and often leads to errors.
Lack of security
With so many separate spreadsheets, it’s almost impossible to see who has made what change and when. While you can add some restrictions, these can make it hard for people to provide input when needed.
Time lags
When a change is made to one spreadsheet, information isn’t automatically updated across other spreadsheets that link to it. So before you can do anything with it, you’re left waiting for information to be consolidated.
Poor visibility
Depending on the size and nature of your business, capturing that granular level of detail can take too long or be too complex to manage. This means you could be missing key driver details in your budgeting process.
“Driver based budgeting in the sales workbooks was a huge step forward for us, allowing a lot more flexibility and choice about how we determine our sales figures. Phocas facilitates a business-wide, connected and dynamic budget.”
Michelle McKee, Group Project Accountant, Haldane Fisher
Extend your FP&A planning with confidence
Driver-based budgeting in Phocas Budgeting & Forecasting helps businesses break down silos between finance and every other department by connecting and synchronizing plans across the entire organisation.
Find common ground between teams, when you integrate financial and operational drivers into your budgeting process. Understand the ripple effect non-financial drivers have on the rest of the business. And visualize all of this within one single source of truth, so that real-time information is available whenever you – or other teams – need it. As a result, your budgeting process can be:
Inclusive
Under this approach, everyone becomes involved in the budgeting process, which helps get buy-in from the start
Reliable
Information is automatically available in real-time, so you can create forecasts based on real results
Timely
With no more waiting around for different teams to supply their data, you can re-forecast and adapt to changing conditions fast
Secure
Replace multiple versions with a master budget and forecast where you can set access levels for added security
Accessible
Work with an interface based on Excel for a familiar feel and easy adoption across the business
Flexible
Shape the driver-based budgeting module to suit your unique business.
Learn more about how you can integrate operational and financial drivers within your business budgeting process by requesting a demo today.

Empowering businesses with intuitive data analytics, driving informed decisions for growth and profitability. We make people feel good about data.

Simplify financial scenario planning
Most successful business leaders have an eye on the future and, to do so, use some form of strategic planning. One successful technique is Scenario Planning, a method that helps finance and other team members review multiple scenarios to determine how internal shifts and changing market conditions may impact the bottom line. Scenario planning is a critical aspect of the budgeting and forecasting process.
Read more
Phocas is a Software Advice 2023 budgeting and forecasting FrontRunner
It's our customers and employees who are the driving force behind everything we do. We are excited to share that Phocas has been recognized as a leader in the Budgeting and Forecasting software category in Software Advice's 2023 FrontRunners Awards. This achievement holds great meaning for us as it highlights the successes our customers have experienced using our software. This was made possible through the hard work of our dedicated employees, making our first appearance in the Budgeting and Forecasting report a very special one.
Read more
Set and forget budgets don’t cut it. Business success demands budget forecasting.
When expectations built into budgets are not delivering, then it’s time to revise. Often business people don’t realise there is an issue for weeks because viewing budget vs actual numbers can involve a lot of manual work - so it’s put in the too hard basket. The finance team needs to get the actual numbers from the ERP, manually add them to the budget figures in spreadsheets and then run formulas for comparison. It’s the same team who has spent two months bedding down a budget, who aren’t keen to poke the ‘budgeting’ bear so soon after it has been approved.
Read more
The 3-statement model software that effortlessly reveals the full cashflow picture
We all know cash is king in keeping your business alive. As organisations continue to face supply chain constraints, the rising cost of raw materials and late paying customers — cashflow is an ongoing concern — especially for commodity-based industries.
Read more
Find out how our platform gives you the visibility you need to get more done.
Get your demo today