Profitability Analysis

Knowing what profit you make on each customer is essential for any organization. It is often straight-forward to determine the revenue of each customer. It is far more difficult, however, to determine 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 or how much profit you make on a customer.

The profitability analysis solution is designed to solve just that: share indirect and overhead costs over all your customers or products in a fair and traceable way. The result of these complex calculations is then available for further processing in visualization tools like PowerBI.


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Develop cost allocation profiles

The Cohelion Allocation Engine lets you configure cost drivers and assign them to all cost accounts.

Cost drivers are the metrics that define the proportion of total shared costs that need to be assigned to each customer or product. A cost center allocation could be:

  • equally distributed over all customers;
  • done proportional to the revenue;
  • done by number of sold products;
  • calculated by number of damages;
  • or a combination thereof.

The Allocation Profile is where you assign a cost driver to each cost center. You can create your own what-if scenarios by setting up multiple allocation profiles.

Generate ad-hoc profitability reports

Besides creating automatically calculated monthly cost and profitability figures, it can also be used for ad-hoc analysis or reports. For example, you can create an ad-hoc profitability report 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 continue to decrease.

Tailored to multiple use cases

Customer profitability is just one of our special use cases for our allocation engine. With a similar setup you can determine profitability per customer, sector, or see what offices are most profitable (or not).

Alternatively, you can see profitability per product (group) and much more. The possibilities are endless!

Want to know more?

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