3 reasons why CCH Tagetik Profitability Analysis lets you focus on your business
Identify the most profitable areas of your business with CCH Tagetik Profitability Analysis
Understand the profitability of your customers, products, and business units. With a robust allocation engine, CCH Tagetik makes it easy to analyze profitability by any dimension. Automate the allocation of direct or indirect costs down to any level using financial, statistical or historical drivers.
- Use configurable allocation rules for driver-based allocations
- Analyze profitability by customers, products or channels
- Evaluate scenarios using highlighted threshold variances
- Determine true costs with activity based costing
- Understand the margin impact of direct and indirect costs
Investigate profitability at every level with CCH Tagetik
CCH Tagetik enables you to evaluate the revenue generating potential and cost effectiveness of every initiative, customer, product line, and activity by giving you greater insight into the drivers impacting profitability.
- Make informed decisions with business driver analysis
- Analyze budget-actual variances from different angles
- Align cost and revenue drivers for more efficient modeling
- Use a single source of data for accurate analysis
- Easily adjust allocation drivers with operational models
What is profitability analysis?
Profitability analysis seeks to understand a company’s ability to generate profit. When companies report on sales and profitability data, analysts can then drill into that data by analyzing drivers like customer, country, product, number of units, price etc., in order to identify which drivers are yielding profits and which drivers are leaking them.
Common drivers are:
- business segment
- product/service type
- sales channel
- geographical area
- customer type
- individual customer
- stage in the production process
Each driver is analyzed to determine segments that are most profitable and identify those which aren’t. For example: the most profitable customers vs. the least profitable customers. Thorough profitability analysis can provoke positive change within organizations, leading to action based on key insights, like fast responses to changing customer needs. It functions to maximize the effectiveness of the product mix and remedy areas of decreasing profit margins.
What is activity-based costing - ABC ?
Activity-based costing (ABC) is a costing methodology used to more accurately allocate overhead/indirect costs to the items and activities that use it. The ABC costing method does this by assigning costs to products, services and projects based on the resources activities consumed and the subsequent activities that go into them.
ABC is an effective way for businesses to understand the complex relationship between cost and profitability as a result of products, customers, production and processes. By assigning indirect costs to these activities, ABC is used to reduce superfluous overhead, unprofitable products, identify ineffective processes and lower prices.
Often, ABC is used by the manufacturing industry because of the emphasis on production, the complexity of its activities, and their associated costs.
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