Business cost analysis is essential for organizations aiming to grow sustainably and efficiently. Without accurately measuring costs, many organizations end up making intuition-based decisions, which can compromise results.
A great example of the importance of analyzing metrics to ensure results comes from the music world. Before every show, the band Metallica uses Spotify data to select the most popular songs in each city. This way, they create a personalized setlist for that audience, ensuring performances that deeply connect with their fans. This process exemplifies the importance of measuring data to better manage results. It’s no coincidence that the band remains active more than 40 years after its formation, adapting to changes in the entertainment industry and attracting audiences to all their shows.
In the business environment, cost management requires the same level of precision. Knowing exactly how to allocate indirect costs, understand idle resources, and identify the most profitable clients are fundamental steps to building solid growth strategies.
Just as Metallica uses data to shape their performances, companies that invest in business cost analysis can identify the greatest opportunities for improvement. For instance, fixed costs are often allocated generically, leading to distortions and impairing a true view of profitability. Similarly, companies that fail to adequately measure their processes, activities, and business often manage based on feeling, assigning costs as they see fit to each activity, product, or process.
By detailing costs such as sales, marketing, or back-office expenses, these can be directly allocated to the activities and clients consuming them. This brings clarity and allows for precise adjustments in pricing and service strategies, enhancing operational efficiency and profits.
Accurate data as the foundation for strategic decisions
Companies that use advanced tools like MyABCM can transform complex metrics into strategic decisions. The software acts as a “Spotify for cost management,” offering a detailed view of processes, enabling adjustments, and promoting greater profitability.
Just as a band tailors its setlist to deliver an unforgettable show, companies that continuously measure and adjust their costs are better equipped to stand out in the market and serve their clients more effectively.
If you want to transform your management and increase profitability, fill out the form below to learn how MyABCM can help your company measure and manage costs with precision.
Customer portfolio management is essential for ensuring strategic decisions that maximize your business’s profitability. Many companies still associate customer success with generated revenue, but this view can obscure critical improvement opportunities. After all, customers with high purchase volumes may be less profitable when the costs associated with serving them are analyzed.
A detailed analysis of service costs reveals that not all customers contribute positively to the company’s financial health. According to studies from Harvard Business Review, the distribution of customer profitability is as follows:
Identifying which customers demand more effort and resources enables more precise decisions regarding pricing and discounts. Companies that neglect this cost evaluation often face distortions. This happens because fixed costs are poorly distributed among the remaining customers, which can turn neutral customers into unprofitable ones.
It might seem like the best solution is to “fire” an unprofitable customer. However, without proper cost evaluation, the company could face an unexpected impact: fixed costs, previously allocated across all customers, would now be redistributed among the remaining ones. As a result, customers that were once neutral or profitable may begin generating losses, shifting the problem rather than solving it and harming profitability further.
Solutions such as our profitability calculator can help you identify each customer’s true situation and make more confident decisions.
Effective customer portfolio management is a key step in improving business results. It provides valuable insights into which customers to prioritize and which need specific strategies to become profitable. One efficient method for this analysis is activity-based costing (ABC), which allows costs from sales, marketing, and logistics to be directly assigned to the customers consuming them.
With this approach, decisions such as adjusting contracts, redefining discount policies, and even discontinuing unprofitable relationships (while understanding how this decision impacts the company’s finances) become more strategic. This ensures the organization maintains a balance between profitable customers and those that can be optimized, driving sustainable growth.
Investing in customer portfolio management is a way to transform how you view your business. By focusing more clearly on the 20% to 30% of highly profitable customers and employing specific strategies for others, you can enhance profitability and reduce inefficient costs.
Want to better understand how to improve customer management and boost your results? Fill out the form below and discover how we can help your company grow smarter and more profitably.
Discovering how to increase profitability is a key concern for any company, especially in increasingly competitive markets facing growing management challenges. One of the keys to achieving this goal lies in the efficient handling of indirect costs, eliminating distortions that can compromise margins and strategic decisions.
Between 20% and 40% of a company’s products or services can incur losses without it being noticed. This often happens due to failures in allocating indirect costs, which are becoming increasingly significant in diversified organizations.
Studies show that many companies rely on methods such as volume- or revenue-based allocations, while others skip allocation altogether, relying solely on gross margin. Worse still, many times the distribution is based on feeling, depending on what managers believe should be assigned to each product, service, or activity. This approach leads to inaccurate decisions affecting pricing, commercial discounts, and even strategic direction.
Management based on feeling may seem adequate but often results in distortions that harm profitability. Common surprises include discovering that the company’s most profitable client is undervalued, or that the best-selling product generates losses. These issues are prevalent in businesses that neglect analytical methods for cost allocation.
Surprisingly, this doesn’t just happen in small businesses. We’ve implemented projects for a multinational with billions in revenue, where almost 30% of costs were allocated based on the feeling of managers.
Relying on intuition can mask the true efficiency of processes, increasing the costs of activities that don’t add value to customers and reducing competitiveness in the market.
Adopting a data-driven approach is crucial to optimizing costs and finding ways to increase profitability in your company. Analytical tools and structured methods reveal the reality of every aspect of the organization, enabling the elimination of non-value-adding activities, precise resource redistribution, and maximized net margins.
This transformation allows companies to identify their most profitable products, services, and clients, redefine commercial policies, and direct investments toward areas with the highest return potential.
Keeping your company competitive and profitable requires moving away from intuition-based methods and adopting a management approach focused on efficiency. Now that you know how to increase profitability, it’s time to take the next step.
Fill out the form below and find out how we can implement a strategic management approach that transforms your business results. We’re ready to help you reach new heights of success.
Resource optimization is essential for any company seeking to reduce costs while increasing efficiency and profitability. When inefficient processes take over—like redundant activities or rework—the impacts are felt both financially and in customer satisfaction. Below, we’ll share a curious example that illustrates this issue and explain how to identify inefficient processes and correct them.
Imagine buying a new pair of shoes, only to find upon opening the box that the shoes are two different sizes. This real-life scenario happened with a renowned Brazilian shoe brand, where customers across the country started receiving mismatched pairs.
To address the issue, the company implemented a labor-intensive solution: assigning employees to manually check each pair on the production line and redirect mismatched pairs to another group for matching, which were then sent back for further inspection. While this approach “resolved” the immediate problem, it added unnecessary costs and consumed resources without providing real value.
The true solution lies not in fixing the consequences but in optimizing resources to eliminate the root cause of the problem.
According to studies by major consulting firms like McKinsey & Company and Boston Consulting Group, approximately 60% to 70% of manufacturing activities and 30% to 50% in the service sector do not add value. These include tasks like rework, unnecessary movements, and redundant checks—as in the shoe factory example.
Eliminating these activities requires a detailed analysis of operational processes. Key steps include:
For example, instead of manually checking shoe pairs, the company could investigate the root cause of size mismatches and correct it at its source.
When an organization adopts resource optimization practices, the benefits are clear:
In the case of the shoe company, optimization eliminated several unproductive activities, such as manual inspections and pair matching. It also significantly reduced costs associated with rework and unnecessary movements.
The first step in resource optimization is mapping existing processes to identify bottlenecks. To achieve this:
By optimizing resources, you not only improve financial outcomes but also position your company to compete in an increasingly dynamic and demanding market.
In the grand parade of corporate efficiency, do you want to walk confidently or trip over unproductive activities? Now that you know the benefits of resource optimization, it’s time to take action.
Fill out the form below and talk to our specialists to discover how we can help optimize your resources and drive efficiency and profitability in your business!
Do you know the profitability of your company’s customers? This is a crucial factor that could be directly impacting your financial results. Many companies focus solely on revenue but overlook customer profitability analysis, compromising their overall profitability.
Let’s explore how to identify unprofitable customers and implement strategies to improve your business results.
The customer with the highest revenue isn’t always the most profitable. A study by Harvard Business School found that 20% of customers are highly profitable, 70% are neutral, and 10% are extremely unprofitable.
This happens because many costs associated with serving customers, such as sales visits, personalized campaigns, and specific demands, are not properly measured. As a result, resources are consumed in sales that ultimately generate losses.
A recommended practice is to adjust the commission structure for salespeople, basing it not only on revenue but also on how profitable each customer is. An efficient model could include a split, such as 60% based on revenue and 40% on profit.
This approach encourages salespeople to prioritize more profitable deals, optimize visits, reduce unnecessary discounts, and increase negotiation efficiency.
The first step is to identify which customers are profitable and which are generating losses. From there, corrective actions can be implemented, such as renegotiating contracts or reevaluating service efforts. Companies that do this stand out, gain competitiveness, and increase their profit margins.
Understanding the return generated by your customers is essential for ensuring the sustainable growth of your business. Before offering discounts or prioritizing large orders, ask yourself: is this customer contributing to my company’s revenue or profit?
Fill out the form below to speak with one of our specialists and learn how to analyze each customer’s profitability to improve your results!
Many software providers try to convince managers that Excel has no place in financial operations anymore, but the truth is that it remains a powerful tool. The key isn’t choosing between Excel or cost management software but knowing how to combine the advantages of both.
In this post, we’ll show you how to merge these two tools to enhance your company’s cost management and profitability.
It’s true that Excel isn’t perfect and can lead to significant errors, as studies from major consulting firms have shown. The Association of Chartered Certified Accountants (ACCA) states that 90% of spreadsheets contain critical errors, even though 90% of users believe theirs are flawless. Similarly, PwC reports that 85% of spreadsheets have major flaws, and KPMG cites similar figures, with 90% errors.
However, despite these shortcomings, Excel remains one of the most popular and accessible tools in the business world. Its flexibility and simplicity for calculations and data organization are unmatched, especially for smaller businesses or specific tasks where speed and ease of use are crucial.
Many companies fall into the trap of thinking that adopting management software means abandoning Excel. This perspective is outdated. The ideal approach is to leverage the best of both worlds: use Excel for quick tasks, prototyping, and adjustments, and management software to ensure integrated, secure, and analysis-ready data for your company.
A cost management software like MyABCM can seamlessly integrate with Excel, allowing you to export data from spreadsheets to the system without losing accuracy. This saves time while maintaining the flexibility Excel provides.
By combining Excel and cost management software, your company gains precision and flexibility. Excel enables quick data organization and ad-hoc analyses, while the software offers advanced tools to monitor financial performance and optimize costs on a scalable basis. With the integration of both tools, you can use Excel to design financial models or adjust data and then transfer the information to the management system for deeper analysis and accurate reporting.
For example, a recent client successfully structured a complete cost model in Excel and, with simple copy-and-paste commands, transferred the data to a multidimensional SQL Server database. From there, they performed more complex analyses in BI systems or OLAP cubes, benefiting from Excel’s speed for prototyping and the robustness of our cost management system for detailed and efficient analysis.
See how to integrate Excel with cost management software to create dynamic financial models and perform advanced analyses with OLAP cubes.
As we’ve seen today, there’s no need to choose between Excel or cost management software. By integrating the two tools intelligently, you can take advantage of the best of both worlds. Use Excel for quick tasks and the software for more complex and secure analyses. This combination optimizes cost management and profitability for your company, providing greater efficiency and agility in financial processes.
Fill out the form below to speak with one of our specialists and discover how integrating Excel with MyABCM can transform your company’s cost management!
If you want to keep your business on the right track, you must stay alert to the traps that can be fatal. Here are 10 foolproof tips to drive your business to bankruptcy—and how cost management can be the key to avoiding these mistakes and ensuring your company’s survival.
If you’re in manufacturing, focus solely on products; if you’re a service organization, focus exclusively on services. Channels and customers are just consequences, and measuring the cost of serving them is an unnecessary luxury.
Many business owners believe that focusing exclusively on products or services means managing their company efficiently. However, this mindset is a major mistake. Cost management also involves controlling how these products and services impact the company’s overall expenses. Effective cost management integrates all aspects of the business, including channels and customers.
These are costs you’d have anyway, so why bother with back-office expenses or indirect costs generated by operations?
Ignoring indirect operational costs may seem like a practical solution, but it’s one of the surest ways to drive your business to failure. Effective cost management must account for all costs, including overhead, and identify where waste occurs.
Buy low, sell high, and pray. Who needs strategy when you’ve got faith?
If you think gross margin is the only important metric, your business might be in danger. Focusing solely on sales while ignoring cost management can lead to misleading results. Proper cost management considers the total cost of production and operations—not just sales.
Maximize cost allocation through spreads, especially based on revenue or volume. After all, if it works to split a bar tab, why wouldn’t it work for an entire company?
Using spreads as a cost allocation method is a quick way to generate significant errors. Cost management should rely on more precise methods, analyzing activities that truly impact production and services, ensuring accurate cost distribution across the business.
Need more detail? Add another cost center to accounting. KPIs? Waste of time. Focus on selling more, and if costs become an issue, start laying off employees.
Overlooking process and activity management can be a fatal error. Effective cost management requires analyzing the profitability of each process and activity to ensure efficient allocation of capital.
Moreover, layoffs are not a sustainable cost-reduction strategy.
Cost management is just another IT project. Modeling is a minor detail, and all business rules will be defined by the Systems team.
Relying solely on an ERP for cost management is a mistake. Implementing a cost management system requires customization and cannot be entirely delegated to general management software, which often lacks specific functionality to properly track and allocate costs.
Every company has redundant activities, “inevitable rework,” or processes that “have always worked.” Why change something that’s not broken?
Failing to address duplicate tasks and ineffective processes is one of the biggest traps for a business. Cost management must critically assess and eliminate processes that create waste while focusing on those that bring real value.
Don’t create a communication plan. It’s best to keep the cost model hidden in Controllership and surprise everyone with unexpected charges.
Hiding cost models can lead to negative surprises, especially when costs spiral out of control. Good cost management practices include proper planning and transparent communication between departments.
The more detailed the cost model, the better! Tracking millions of activities seems like a great idea: you can always consolidate them later. Precision is key, even if it’s overkill.
While accuracy is essential, excessive detail can shift the focus away from what truly matters. Cost management should strike a balance, avoiding unnecessary complexity.
All that matters is being price-competitive and selling in volume. Whether you make a profit or not is just a minor detail. If the budget gets tight (and it will!), go for another round of funding or consider selling a unit, a product line, or even part of the business.
Growing without considering costs is a critical mistake. Cost management must align with pricing and volume strategies to ensure long-term profitability and protect the company’s financial health.
Don’t let your company fall into these traps! Fill out the form below to talk to one of our specialists and learn how to implement effective cost management to ensure your business’s financial health.
When it comes to cost-cutting, laying off employees might seem like a simple and immediate solution. After all, personnel expenses often represent one of the largest costs within organizations.
However, over the years, studies have shown that this practice can cause more harm than benefit in the medium to long term. Layoffs do not solve structural issues and, in many cases, may even increase a company’s costs.
According to The US Conference Board, 30% of companies that resorted to layoffs expecting cost savings saw an increase in expenses. Additionally, 22% of them ended up laying off the wrong employees, leading to the loss of valuable talent and the need to hire again.
Beyond the immediate impact, laying off and rehiring creates an expensive cycle. Deloitte indicates that 75% of companies that laid off employees to cut costs eventually had to rehire for the same positions within a year.
It’s worth noting that these costs include not only the selection and hiring processes but also the training and adaptation time for the new hire, who typically has lower productivity initially. In other words, the initial cost of a layoff (which is already not low) ends up being added to long-term investments to replace an employee who shouldn’t have left.
These figures reflect a concerning reality: layoffs may seem like a quick fix but fail to address deeper operational issues with more significant impacts on business costs, such as inefficient processes and hidden waste. In the end, they may actually generate more unnecessary costs.
McKinsey & Company points out that only 10% of attempts to cut costs through layoffs prove effective after three years. This is due to the fact that, without revising internal processes, companies end up redistributing unproductive tasks to a smaller team, potentially compromising the quality and efficiency of work.
For this reason, companies must focus on identifying which processes add value and which can be optimized or eliminated. Without this review, layoffs only exacerbate problems, placing an even greater burden on remaining employees.
A study by The Economist highlighted that companies surviving crises are those that know where not to cut costs. They prioritize strategic areas that ensure customer satisfaction and maintain processes that generate value. In other words, the secret isn’t in layoffs but in improving efficiency and ensuring that resources are being used wisely.
Instead of turning to layoffs as a cost-cutting solution, companies should focus on efficient cost management by analyzing processes, eliminating redundant activities, and keeping customer satisfaction a priority. The key to success isn’t cutting staff, but optimizing operations and allocating resources (including human resources) more strategically.
Want to find out where to cut costs without laying off employees? MyABCM can help. Fill out the form below to learn more!
Organizational management is a vast and complex field, and the diversity of software available to support operations is remarkable. Each type of software plays a unique role, serving specific needs. Therefore, MyABCM stands out as a specialized solution that excels in addressing specific challenges of cost and profitability management in companies, not as a substitute for BI tools, despite having embedded BI to benefit companies without a BI solution.
While BI generates dashboards that merely compile and display information obtained from other software and data sources, MyABCM processes and transforms information cubes, cross-referencing and calculating from various sources to then generate new data that can serve as a basis for cost and profitability management, providing vital reports for decision-making. Thus, it plays a more strategic role, offering features that enable understanding the actual costs of the business across different dimensions, such as channels, customers, activities, and specific products, etc.
In other words, the goal here is to minimize the use of cost allocations throughout the organization and, consequently, eliminate the terrible distortions linked to these allocations that can be very dangerous for companies, impacting various managerial decisions on pricing, sales commissions, discounts, etc.
A BI, on the other hand, seeks existing data in the organization such as Accounting Accounts, Production and Billing Volumes, periods, and others, and presents this information in an organized and didactic way. However, note that here there is no transformation of information, and therefore, the allocations continue to occur. For this reason, Prof. Bala Balachandran from Kellogg University in the United States often comments that “these increasingly sophisticated BI systems allow extremely misguided decisions to be made very simply and quickly!” which is a danger!
Let’s see an example:
Imagine a factory that produces various products from the same raw material: plastic. The ERP records data such as the value of input purchases, payroll, accounting entries, production and billing volumes by product and customer. Potentially, we have here a flawed cost model, since allocations were used for the costs of support areas and, although we know precisely the billing customer by customer, this information is of little use when we want to understand the result customer by customer, after all, we do not have information on the “costs of serving”, we did not allocate marketing and sales expenses for these customers and channels and we do not even know to which areas the IT expenses are being allocated in the organization.
MyABCM, in turn, allows for a sophisticated modeling of costs and profitability, which essentially consists of designing a structure where the various accounting accounts of the company are allocated using allocation criteria that make sense and respect a cause-and-effect relationship through multiple levels until reaching the dimensions necessary for the client to manage their company. These dimensions may include Products, Customers, Channels, Markets, Projects, Businesses, Segments, etc., and also include the costs of support areas. In this way, we have a complete snapshot of costs with full traceability that allows managers to make the best business decisions based on facts.
And if you already have or intend to use a BI, do not worry. MyABCM integrates with all of them.
MyABCM stands out for its ease in the process of construction and data loading in the cost modeling structure. While BI software generally requires complex and extensive configurations, MyABCM is a ready-made calculation engine that requires only parameterization, without the need for development, simplifying implementation.
MyABCM has a robust calculation engine, optimized specifically for the requirements of cost and profitability management. Designed with a specialized distribution mechanism, it is capable of in-memory calculations, optimizing appraisal time.
The scenario-building function allows users to create and explore various hypotheses, providing a broader view of the financial implications of different situations.
Within the scope of scenario simulations, we have another important differentiator of MyABCM: push and pull simulations. The push simulation involves the sequential propagation of changes in variables throughout the model, to understand what the final result would be if some variables were changed. The pull simulation, on the other hand, goes back to identify the initial conditions necessary to achieve specific results, identifying bottlenecks and capacity constraints, and acting as a true sophisticated planning component in organizations.
This approach provides a deeper insight into the financial implications of different scenarios, allowing not only to anticipate changes but also to retroactively understand the factors that led to certain outcomes. This capability goes beyond the possibilities of BI’s, which do not perform such detailed and sophisticated analyses.
MyABCM offers detailed cost monitoring in different contexts, including Actual, Budgeted, Standard, and Goal, providing a holistic view of financial performance.
MyABCM is the only solution on the market that manages reciprocal costs in all modules and with optimized performance at the computer processor instruction level, an essential resource in interdependent organizational environments. By allowing allocations between sectors that share services and resources, MyABCM offers a more accurate and realistic view of costs.
As an example, imagine here that the IT area works for HR and also for Production; already the HR area also works for IT and for Production; note that between HR and IT we have a simultaneous cost allocation that must be calculated in order to avoid distortions in costs – MyABCM deals with this transparently and with extreme agility.
This process goes beyond the cost calculation tools offered by BI’s. The ability to handle interdependencies between sectors, essential for the financial health of the business, is not contemplated in BI’s, precisely because it does not align with their objectives.
BI software is powerful in generating reports. However, they depend on other tools to generate advanced calculations for cost management. MyABCM, on the other hand, offers the ability to create specific reports, tailored to the needs of cost and profitability management of the organization. This allows for a more in-depth and targeted analysis, optimizing the decision-making process.
Moreover, MyABCM offers integrations with other systems, such as ERPs and BI’s themselves, facilitating use in conjunction with various tools employed in the organization.
Ultimately, when choosing between BI software and a specialized solution like MyABCM, organizations should consider their specific needs for cost and profitability management. With its focused approach, advanced functionalities, and ability to provide precise insights, MyABCM stands out as a strategic choice for companies seeking more accurate and efficient financial management.
Learn more about how MyABCM can help your organization. Fill out the form below and talk to our experts!
There are various system options for cost calculation in SAP, varying in value and features.
In this article, we will introduce a Brazilian alternative that not only integrates seamlessly with SAP but also specializes in cost and profitability calculation, offering numerous advantages for your organization.
For companies looking to optimize cost calculation in SAP, MyABCM stands out as a specialized option with many attractive features. Available on the SAP Store, the system integrates smoothly with SAP and offers a series of functionalities that allow companies to get a snapshot of their cost structures, simulate scenarios, and make more confident decisions.
MyABCM offers a series of advantages for companies wanting to efficiently calculate costs and profitability:
While many available solutions may represent a significant cost, MyABCM is more affordable, delivering valuable and efficient features. This makes it an attractive option for companies of various sizes, enhancing the return on investment.
MyABCM is notable for its ability to provide a high degree of cost traceability. This is essential for companies that want to understand the origin of their expenses, optimize pricing, comprehend the role of each product, service, and customer to the organization, and make informed decisions based on accurate data.
The ability to gain insights in less time is invaluable for companies that need to make agile decisions in a dynamic business environment. One of the major benefits of MyABCM is the speed of implementation, calculations, and information availability, combined with smooth data integration between SAP and its system.
MyABCM is used by large companies in more than 50 countries to calculate costs in SAP, covering a wide variety of sectors, including banking, industrial, governmental, healthcare, and many more. This global adoption is a confirmation of its effectiveness in meeting the needs of organizations of all sizes and in different segments, with flexible tools that adapt to the specifics of each business.
For companies looking for specialized solutions to enable integrated cost management within the SAP ecosystem, MyABCM stands out for being accessible and offering functionalities specifically developed to optimize the identification and calculation of costs, with excellent cost-effectiveness. Make this strategic decision: fill out the form below and speak with our experts.
