Driver-based planning is a planning methodology that builds financial projections from operational drivers — measurable business activities and metrics that causally determine financial outcomes — rather than from historical financial line items alone. By linking financial plans to the operational inputs that drive results (such as transaction volumes, headcount, utilisation rates, or customer numbers), driver-based planning produces more transparent, more auditable, and more responsive financial plans than traditional extrapolation-based budgeting approaches.
Why This Matters
Traditional budgeting approaches often extrapolate from historical financial lines using percentage uplifts — a process that produces plans that are hard to interrogate and quickly become stale when operating conditions change. Driver-based planning replaces this with a model in which financial outcomes are derived from operational assumptions that managers can understand, own, and update. When a driver changes — for example, if planned transaction volumes are revised — the financial implications flow automatically through the model, keeping the plan current without requiring manual line-by-line revisions.
Where This Fits
This term sits within the Planning & Projections area of Performance & Control.
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