Driver based forecasting is the identification of key drivers of
the business and the forecasts are based on these drivers. The
components of the revenues and expenses are considered as
operational drivers.
Drivers identification is important because of following
reasons:
- The business environment keeps on changing. And the traditional
approach does not lead to continuous success when the circumstances
keep on changing.
- Drivers help to check the factors which influence the
performance of business.
- The identification is important because the key drivers keeps
on changing because of competition, business conditions etc.
- It helps to establish detailed relationship between assumptions
and the actual logic.
- The segregation of drivers as external and internal is
important because the internal factors are controllable and
external factors are not controllable.