Drivers are these numbers that open up the stories behind the sometimes opaque revenue and expense numbers, and are the next step for Finance teams.
Last October 2022, Malaya Tech had the honor of helping Anaplan put up Anaplan Connect Philippines, a great day to gather Anaplan current and potential users. It was great to see the achievement of many teams in their Anaplan ecosystems. We had our CEO share a bit about what the Anaplan journey is like in one of the breakout sessions, and one salient insight brought up was drivers.
Drivers, he discussed, mathematically explain revenue or expense numbers as a summand, factor, or generally, as any term or variable in the equation to get said revenue or expense number. It's easier to see in an example; so let's take one from the retail space, specifically for a supermarket.
Number of Customers x Average Monthly Basket Size ($ Value) = Monthly Revenue
In this case, we compute Revenue by multiplying two numbers: Number of Customers and Average Basket Size; these two numbers are the drivers. That revenue can be described this way makes obvious sense. Supermarkets have customers, and given that grocery shopping is quite a regular errand, it also makes sense that there is an average monthly basket size.
This equation, he argued, is an amazing one because it tells a story that is business-actionable. A store manager, may see the revenue number go down from March to April and still not know what to do. However, if he knew that while Average Basket Size stayed the same, it was the Number of Customers that went down, there's now more to be discussed. Changes in basket size can be explained by recessions for instance, while customer base changes, especially when basket size stays the same, might warrant investigation on competitors. Did another supermarket open nearby, for example? The KPI card, or the financial driver report is one of the most insight-rich reports for a company.
The funny thing though is that drivers and the driver equation are not these unknown things. Press any finance or sales person, and he or she would quickly be able to give the driver equation of his/her company. Driver equations are inherent in the business. Airlines already know about number of seats and number of flights per month. Manufacturers know about how many distributors they have and how much these distributors purchase.
Our Malaya CEO discussed Anaplan as one of the best solutions to putting together the financial driver report. In Malaya's experience, organizations need computational power and data discipline to get to this, which Anaplan caters to easily. Malaya's solutions for driver-based financial reporting is dynamic and future proof: we understand that drivers adapt as reporting becomes more sophisticated, so we make it easier for finance teams to add new drivers using a general driver equation. Anaplan is the perfect system for this.
Not to be underestimated is the data discipline needed for this. Drivers are often more granular and are often less available on ERP systems, but again Anaplan is the best system to help empower the data discipline to get driver numbers on the ecosystem. Loading and integration to other systems is easy, with the right implementing partner. And once loaded, it's easy to transform and correct.
Want to learn more? Contact Malaya's consultants and let's plan out your digital empowerment!