To know what profit you make on each customer essential for any organisation. And while it is often straight forward to determine the revenue of each customer, it is far more difficult to determine the fair costs that should be allocated to each customer as that is generally a combination of direct, indirect and overhead costs. What fraction of total Office Rent or Overhead cost should you assign to each customer? If costs are not accurately known, then it’s impossible to know if, and how much profit you make on a customer.
The Cohelion Allocation engine is designed to solve just that: share indirect and overhead costs over all your customers in a fair and traceable way. The result of these complex calculations are then available in Excel or in facttables for further processing in BI visualisation tools like PowerBI.
The Allocation engine lets you configure cost drivers, and assign those to all cost accounts.
Cost drivers are the metrics that define the proportional share of total shared costs that needs to be assigned to each customer. It could be that a cost center should be equally distributed over all customers. Or that the allocation should be done proportional to the revenue. Or number of sold products. Or number of damages. Or a combination of those.
Allocation Profiles is where you assign a cost driver to each cost center.
You can create your own what-if scenario’s by setting up multiple Allocation Profiles.
Besides creating automatically calculated monthly cost- and profitability figures, it can also be used for ad-hoc analysis or reviews.
For example, you can create an ad-hoc profitability review of any customer over their entire contract.
The tool also lets you plug in hypothetical values for any cost – or revenue center and show you the impact immediately. This can help you in negotiations with customers, or determine what offices to close if sales keep disappoint.
More use cases
Customer profitability is actually just a special use case of our Allocation engine. With a similar setup you can determine profitability per customer Sector, or see what offices are most profitable (or loss-making). Alternatively you can see profitability per product(group).
And much more, the possibilities are endless.