Discover the fundamentals of driver-based financial planning with Modeliks. This video provides a concise 5-minute overview, explaining how to effectively forecast financials and tailor your financial plan to your business needs.
What is Driver-Based Financial Planning?
Driver-based financial planning is the process of identifying the key activities, also called drivers, that have the highest impact on your financial results and then building your financial model based on those activities.
Why is it Important?
- It makes you think through your business and find ways to improve it! Do you need to hire more employees? When? Do you need to increase prices? Change suppliers? Change marketing or sales channels or are the current ones working well? Do you need to invest in new equipment and when? Do you need to get external financing? What is the impact of all these decisions on your business profitability and cash flow?
- Set goals – Have a clear set of sales, cost, operational, and profitability targets.
- Drive organizational alignment & accountability – Give your employees full visibility of what is expected from everyone, allowing you to drive accountability and action across the organization.
- Measure performance to celebrate and reward good performance and take timely action for improvement.
- Evaluate investment opportunities to ensure they are profitable ideas, not only good ideas.
- Raise funding – You must have a financial plan if you are trying to raise investor funds or obtain a bank loan.
- Make confident decisions supported by numbers.
Don’t forget to watch the video. This is where the magic happens.
See a detailed explanation on How to Create a Financial plan HERE or visit Modeliks to learn more about our financial planning tool.
