Oracle PBCS Driver Base Planning

Oracle Planning and Budget Cloud Service Driver Based Planning

By Anuj Bhatnagar www.bispsolutions.com

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.

You’ll 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 Let’s 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 www.bispsolutions.com

Setting-up Operating Expense Drivers In table-1 you can see how driver’s 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 driver’s 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

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