Increasing Profits with Mid-Year Adjustments

Mid-year adjustments to business plans help many companies improve their tactics while staying on track with long-term initiatives. While many businesses only have impromptu approaches to adjusting business plans, a more structured approach provides flexibility and focuses concentration on the right levers of profitability. Checking in on mid-year financials allows executives and decision makers to not only see how the business is performing, but also to see how their plans are faring mid-year and determine any variances. Furthermore, the ability to identify the root cause of the variance and make a thoughtful adjustment to the business strategy is crucial to optimize business performance and drive profits.

Read more at Forbes Magazine >

7 Fundamentals of a Successful Costing Methodology

For many businesses, spreadsheets are a large part of their costing reality and have proven to do more harm than good when it comes to truly understanding business performance. Establishing a robust costing process doesn’t have to depend on spreadsheets or rigid ERP cost modules. With an integrated costing analytics tool, finance leaders can get access to accurate and actionable performance insights for meaningful business decisions. There are seven areas to consider when establishing a dynamic costing process in your organization.

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The Power of Cost Transparency

“The effectiveness of cost information is driven less by the cost method chosen, and more by the design and implementation of the cost allocation model used to support that method.”

While many businesses effectively analyze their revenue based on products, services, and customers, they often lack meaningful insight into their costs and profits. Companies with a disparate array of financial systems and costing methods find it extremely challenging to understand their financial data and achieve cost transparency. Getting cost data to a more granular level is one of the keys to arming managers with the insights they need to support strategic decision making that goes beyond what is necessary for financial reporting or inventory valuation. To improve overall performance, finance leaders need to make changes to how costs are captured and then harmonize both data and allocation models across the organization.

Read More at Deloitte >

How To Stop Manual Processes From Draining Your Profits

Organizations look to finance leaders to support strategic initiatives by providing actionable information about the business. Ultimately, they can only be successful business partners when reliable financial data is available and when compliance is consistently achieved. When accounting and finance teams rely on manual processes, they struggle to focus on higher-risk areas and analyze trends – especially at peak times during the month. A 2016 Institute of Management Accountants (IMA) study found that 61% of finance teams still rely on spreadsheets for business analytics. As a result, companies have limited real-time data, and little time (if any) is left for analytics that can help identify errors or required adjustments. In today’s world of finance innovation and rapid advancements, businesses that continue to rely mainly on spreadsheets and manual business processes will not be in the race much longer. Digitizing and automating these processes will not only reduce costs and increase efficiencies; it will also free up valuable employees to perform more strategic tasks.

Read More at The Digitalist by SAP >

Profitability Analytics: A New Perspective on FP&A

FP&A  professionals are all generally focused on two things: (1) examining current performance and the immediate past for lessons learned and changes to replicate positive performance or change negative performance and (2) making projections and planning for the future with forward-looking scenarios, analyzing risks and opportunities, and mapping possible responses.

Advances in digital technologies increase the potential for businesses to use powerful tools to improve and expand their FP&A function. Modern organizations need a robust definition of their FP&A practices that will support the entire organization, looking well beyond finance and accounting’s traditional scope and embracing all the value creation and performance goals throughout an organization. Profitability analytics enables FP&A leaders to understand the past while focusing on developing areas of nonfinancial and financial data analytics and modeling that causally support building robust forward-looking scenarios and analyses.

Read More at Strategic Finance Magazine >

How Successful Growing Businesses Are Making Profitable Decisions

“The core of every growing business is an ability to adapt to a world of new opportunities and disruptive risks. Every shift – from detecting the need for change to determining the best move forward – should be informed by data from both inside and outside the organization.”

As midsize companies continue to adapt and grow in an ever-changing marketplace, they must find new and more efficient ways to drive revenue and respond to their customer’s needs. High performing growing businesses are the ones who are adopting technologies that provide advanced predictive analytics and important financial insights. By integrating data analytics and automation capabilities across the enterprise enables these businesses to create a more innovative and profitable decision-making process.

Read More at The Digitalist by SAP >

Are You Benefiting from Your Cost Accounting Tools?

Companies that still rely on their legacy costing systems are putting themselves at more of a disadvantage then they probably realize.

 “Many manufacturers have developed overhead rates that are being used long after their “best if used by” dates. The reasons for this include the thought that inflation isn’t all that significant, so how much different can the rate be from last year, and besides it’s so much work to update the rate. After a while, you find the rate hasn’t been updated in a few years and then your costing system has slid into ineffectiveness. Also, cost drivers tend to not be examined that often. Some manufacturers have always used labor hours as cost drivers, so they do not even consider that the significant capital expenditures they have made in the business make the more plausible cost driver machine hours. In standard costing systems, standards are sometimes not updated as often as they should be for some of the same reasons.”

The result of inaccurate cost accounting systems can lead to investing time and effort into products or customers that are either marginally profitable, or actually unprofitable.

Read More at The Bonadio Group >

Better Decisions with Transparent Costing and Profitability Insights

“With companies under pressure to improve profitability, many seek higher levels of transparency into financial performance to uncover insights that can enhance decision-making and create value.”

Business leaders need actionable analytics to recommend actions that improve the bottom line; such as adjusting pricing, reducing product costs, and rationalizing unprofitable products or services. However, many companies rely on two-dimensional reports featuring a significant amount of words and numbers to facilitate a discussion or communicate a point. But in many cases, the information lends itself to more questions, requiring iterative versions to provide the answers.

Read More at The Wall Street Journal >

Retail Profitability is On the Rise

Retail is considered one of the most challenging industries because of the sheer amount of fierce and visible competition in the market, shrinking profits, rising customer expectations, and the need for talent to work 24/7, 365 days a year. Retail is also one of the most profitable industries for the exact same reasons. Unfortunately, retailers are constantly trying to figure out who their most profitable brands and partners are, and who are not. Profitability can be extremely difficult to navigate in the retail space because it is always changing and there are no re-dos. A tunnel-vision approach to profitability causes decisions to be made that are expected to protect profit, but sometimes cause larger, negative downstream effects. So, what can retailers do?

Read More at The Digitalist by SAP >