Profitability Optimization

by Daniel Potočnik | May 08, 2020 | Blog

As with money, costs must be kept under control at these uncertain times. If you rely on attribution capabilities that allow you to accurately divide indirect costs into services, products or customers, you can understand the true profitability of each segment and decide which ones to optimize.

In today's complex, highly volatile business environment, achieving profitability is a challenge. Detailed research of profitability levels is usually an unmanageable process as it can not be tracked down to the level of product, project, customer, and service.

Profitability optimization is a process that incorporates revenue and total costs (direct and indirect) into analysis to better understand the margins of business at highly detailed levels. Profitability management can be a feasible but simplistic approach that seeks to increase revenue and reduce costs. This practice is attractive because it is simple, but in itself, maximizing revenue is rarely optimal in today's complex business environment.

Profitability management is still in its infancy in many companies. This is a departure from tried and tested approaches that require change across the organization. Therefore, it is necessary for the CEO and senior executives to focus on successful implementation.

Organizations with large scale cost-based (ABC) models are better placed to optimize activities and resources in a way that maximizes company profitability and ensures value creation for all stakeholders. By creating alternative scenarios and analyzing and comparing them, companies can achieve profitability optimization.

Profitability analysis can anticipate sales and profit potential specific to different markets and help optimize it.

Discover how your organization can explore profitability to the most accurate level with CCH Tagetik software. Centralized financial and operational data and best-in-class data exploration tools allow you to see, on an unlimited scale, how operating costs affect real-time profitability.

Profitability optimization is a process that incorporates revenue and total costs (direct and indirect) into analysis to better understand the margins of business at highly detailed levels. Profitability management can be a feasible but simplistic approach that seeks to increase revenue and reduce costs. This practice is attractive because it is simple, but in itself, maximizing revenue is rarely optimal in today's complex business environment.

Increasing revenue and reducing costs is a simple yet complex goal that can be achieved with profitability optimization. Contact us for more information.