DRIVER

BASED
BUDGETING
(DBB)
MODEL
 Budgeting refers to the
process used by the
companies in which the
detailed projection of
revenues and the expenses of
the company for the future
specific period of time are
BUDGETING made considering the different
internal as well as external
factors prevailing at that time
DRIVER BASED BUDGETING
Driver Based Budgeting is a process that
links real resources and activities to the
financials in the budgeting process. This
is usually achieved with support of a
computer system that enables the process
of planning and budgeting to be
managed.
 DBB MODEL
 DBB model is a unique equation that represents a
mathematical relationship between an operational
driver and financial outcome.
 DBB models are built by analysing the cause and
effect relationship of different variables. These
variables are
 Drivers

 Business activities

 Resource requirements

 Financial outcomes
 DBB focuses business plans on factors
most crucial to drive for the growth
and success. These drivers decide the
business activities and resource
allocation for the achievement of
financial outcomes These factors are
known as drivers or levers or
indicators of business.
 Some of these factors are market size
and growth, market share, no. of
customers, sales volume in units and
selling price per unit.
 COMPARISON
BASIS TRADITIONAL DRIVER BASED
BUDGETING BUDGETING
Time Time consuming Reduced budgeting cycles
Flexibility Rigid Flexible
Disconnect Rarely strategically Connected with strategy
focused
Cost Control More focus on cost Balanced focused on cost
control control and service
provision
Value Addition Little value to the Adds value to the business
business
Review Reviewed infrequently Frequently reviewed
Coordination Barriers between Coordination between
 BENEFITS OF DBB

• Clarity of drivers
• Integrity of data
• Operational alignment
• Increased agility
• Less gaming and sandbagging
• Increase in profitability
THANK
YOU