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 Understanding Activity Based Costing / Management
----- How To Use ABC and ABM To
Help Your Own Organization ----- (1) Streamline Internal Processes The first place our customers focus is on improving efficiencies and reducing waste in their own organization. The CPS gives you detailed cost reports (& P&Ls if applicable) for each process, service, product, order or customer, allowing you to view resource efficiency and compare relative efficiency among operations. If you could have your electricity bill broken out by machine, or generate a P&L per sales person, would you? Of course. Why? Visibility. Visibility into financial details makes internal streamlining decisions straightforward. Cut costs where expenses are out of line || Educate your employees on their actual cost per hour || create a shared services costing model to allocate your internal expenses accurately (2) Cost Reporting, Forecasting
and
Allocation Many of our customers have specific cost reporting requirements: maybe they are a governmental organization that needs to prove cost for reimbursement, or they are going to open a new branch and need to budget for next year, or they are attempting to allocate their organization's cost centers to their profit centers. Whatever the case, the CPS' custom reporting tools give them exactly what they need. (3) Put Your Dollars Where You Will Get The Most Return The CPS shows you costs and net profits at every possible level. Use this knowledge to guarantee that you are growing your strengths, and not devoting time and resources to the life support of unprofitable areas of your organization. You may not be able to drop the high cost / unprofitable areas of your organization - but make sure that you are giving the best service to and growing your profitable ones (4) Identify Profitable Orders As They Are Coming In The CPS gives you valuable information about the most critical point of the company / client relationship: the order. Using its cost and profit analysis, the CPS shows you break even order sizes, minimum acceptable order sizes, and provides you with techniques to increase the profitability of orders as they are being placed. Educate your sales force to evaluate the profitability of an order as it is being placed (5) Rehabilitate Unprofitable Customers Without oversimplifying things, there are only 3 reasons a customer is unprofitable: (1) they are buying your unprofitable products, (2) they are buying very small quantities that are below your minimum feasible order size, or (3) they are making you do something above and beyond the norm. Regardless of the reason, the CPS gives you exactly the detail you need to focus your efforts where they will do the most good. Talk with your customers. Why are they not buying your profitable items? || Is there any way you can change your service to them to create a win - win? (7) Change Prices The CPS gives you an exact cost per part or service,
enabling you to modify your prices to reflect the cost where
possible. It also shows you which of your slow moving, add on
type products are unprofitable. Making small modifications to the
price on those items will add dollars to your bottom line without
risking alienating your customers (8)
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plus
many
more
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"Prismata opened my eyes to P&L at a level of detail I've never seen before, and allowed me to view resource allocation under a microscope. For contracting it's invaluable. It's where the rubber meets the road in organizational management." Brendan Webb, Executive Director, TENT Consultants || Customer since 2004 ----------------------------------- "Prismata adds value to organizations, illustrating costs compared to revenues and detailing the driving forces behind the organization's expenses, allowing for increased revenues through better understanding by the employee and management to the business impact of decisions. Prismata offers tools to support strategic planning efforts." Ken K., President HAI, Customer since 2003 |
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