Profitability and Cost Allocation
Margin by product, customer and channel
Gross margin is easy. What to do about it depends on where the cost to serve goes, and that needs rules everyone can see.
The problem
Overhead is allocated by a spreadsheet nobody dares change. Customer profitability is calculated once a year and argued about for a month. Sales do not trust the allocation, so the numbers never change a decision. Each new question means a new spreadsheet and a new argument.
What good looks like
Rules in the open
Every allocation step documented, versioned and traceable to its source.
Multi dimensional
Product, customer, channel and region in one model, not four reports.
Refreshed monthly
Profitability becomes a number people check, not an annual event.
Simulation
Change a rule, a price or a volume and see the margin effect before deciding.
How we approach it
Step 1
Agree the dimensions, cost pools and driver logic with finance and the business.
Step 2
Build the allocation model in SAP PaPM, or in Datasphere where PaPM is not licensed.
Step 3
Present margin and allocation trails in SAP Analytics Cloud.
Step 4
Reconcile to the ledger and hand over.
Built on
Standard content we start from
SAP ships sales and profitability planning inside Integrated Financial Planning for SAP Analytics Cloud, with cost of goods taken from product cost planning, and SAP PaPM comes with sample content for multi step allocation functions and simulation.
The allocation rules themselves are never standard. They are the client's, and building them so they are visible, versioned and traceable to the ledger is the work.
Questions people ask
Talk to us
If customer profitability is an annual argument, make it a monthly number.