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Oracle Planning and Budget

Cloud Service
Driver Based Planning

By Anuj Bhatnagar

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What is Driver Based Planning?

Driver-based planning is an approach to incorporate assumptions of business


activities in financial plans. These assumptions are key drivers which are modeled
to drive financial data such as revenue and expense estimates.

Benefit of using Driver Based Planning -


Driver based planning provides you the flexibility to make quick changes in changing
environment. For example - Due to economic environment change in your organization,
you are asked to cut $200,000 from expenses you budgeted for coming year. For this you
can follow one of the below approach
1. Youll have to go through each line item to make changes. It may not be easy or even
accurate. You can't cut entire amount from a single line item i.e. Travel expenses or
Marketing expenses, these may affect the sales pipeline and the revenue.
2. The other way to make quick changes in budget is working with key drivers. making
changes in few key drivers will allow you to act faster and accurate.

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Understanding Driver based Planning Practically

Lets take the example of Oracle Vision application for a fictitious


company Vision Corp based out of USA, manufacturing computer
equipment and service provider (training and consulting).

Revenue and expense drivers in Vision Planning process:

Revenue Drivers
Sales by Revenue - based on Volume, Pricing, Margin
Service Revenue - based on Sales Revenue
Operating Expense Drivers
Travel & Entertainment - based on no. of sales calls
Office Expenses - based on Headcount

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Setting-up Operating Expense Drivers

Business Rule Operating Expense Set Driver

This code will setup driver values for all level-0


Account of OPEX hierarchy for children of Sales entity

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Setting-up Operating Expense Drivers
In table-1 you can see how drivers values are setting-up. If there is any actual number
at previous year for OPEX accounts (Column E). Driver, Method, and Rate Pct for next
year for plan scenario will be populated (Column B, C, and D) from existing drivers
values (Column F, G, and H).
Table-1

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Setting-up Operating Expense Drivers
Business Rule: Operating Expenses Plan

Code written in red block is defining the driver


volume for all OPEX accounts for all Sales
entities based on the driver value for the
account.

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Setting-up Operating Expense Drivers
There will be different driver volume of each account based on the
driver value. i.e. for accounts having driver value 1, account will be
assigned Total Revenue (4001) of Working version (CurVersion) for
product computer equipment (P_TP1).
Table-2 and Table-3 are illustrating the code written above.
Table - 2

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Setting-up Operating Expense Drivers
Table -3

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Setting-up Operating Expense Drivers
Code written below is defining the driver Rate for all OPEX accounts for
all Sales entities based on the Method and Driver values for the account.

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Setting-up Operating Expense Drivers

As the code written above for conditions defined


Driver Rate will be same as Rate Pct for all those accounts for which Driver
value is 1 (% of Revenue). i.e Driver Rate for Account 7110 (Advertising).
Driver Rate will be 1 + Rate Pct for all those accounts for which Driver value is
7 (None) or #Missing and Method should have a value. i.e Driver Rate for
Account 7620 (Legal Services).
Driver Rate will be multiplication of historical Driver Rate for previous year and
1 + Rate Pct of next year for all those accounts for which Method value is 1 (LY
Actual +/- %). i.e Driver Rate for Account 7410 (Utilities).
Driver Rate will be multiplication of planned Driver Rate for current year and 1
+ Rate Pct of next year for all those accounts for which Method value is 2 (CY
Plan +/- %). i.e Driver Rate for Account 7640 (Airfare).
Driver Rate will be multiplication of forecasted Driver Rate for current year
and 1 + Rate Pct of next year for all those accounts for which Method value is
3 (CY Fcst +/- %).

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Setting-up Operating Expense Drivers
Table - 4 is depicting the examples for the code written above.
Table - 4
Planning Based on Driver Values
Code written in Red block is calculating the planned numbers for all
OPEX accounts based on the drivers, rate all Sales entities.

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Planning based on Driver values
Table - 5 is depicting the examples for the code written above.
Table 5
Planning Based on Driver Values

Similarly, Driver based planning can be done for other line


items
Travel & Entertainment - based on no. of sales calls
Office Expenses - based on Headcount
Sales by Revenue - based on Volume, Pricing, Margin
Office Expenses - based on Headcount

Thank You!!!
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