“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.