Improve the profitability of customers, products and channels

Your task is to make your company more profitable. But are you focusing on the products and customers that create value or those that diminish it? How can you be sure that the decisions and actions you take are improving overall profitability?

Many companies still rely on conventional accounting information to answer such questions as:

• Which orders, products and customers are profitable or unprofitable?
• Which channels and regions are profitable or unprofitable?
• What is the net margin?
• What are the real costs to acquire a customer?
• What is the cost-to-serve for customers in different channels?

With conventional financial accounting the answers you receive are often inaccurate or misleading. That's because it's not possible to allocate all relevant costs to the appropriate product or customer. A customer that appears to be profitable can, in fact, be unprofitable. And when margins are squeezed and competition is stiff, inaccurate or misleading information is a serious problem.

By supplementing your existing business system with an Activity-Based Costing/ Management (ABC/M) system, you can get an accurate view. ABC provides information about the true profitability and costs per product, service, customer or sales channel. What's more, it shows the root cause of the costs. This makes it possible to improve profitability.

Using ABC, managers at all levels will be able to make fact-based decisions to:

• Make profitable customers more profitable
• Identify unprofitable customers
• Adjust the product mix
• Rationalize the product assortment
• Improve internal processes
• Price products more effectively
• Confidently negotiate with customers regarding discounts, number of deliveries, minimum order size, payment terms, etc.

Learn about the Prodacapo software for Activity-Based Costing/Management »

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For more information contact us or a Prodacapo partner.