Overview:
Ultimately costing principles, such as the causality principle, must be converted into practical practices with supporting tools.
This presentation examines how cost modeling has evolved over the last century. It will describe the trends and obstacles that have helped or delayed developments. These evolving areas and trends include:
- The expansion from product costing to include channel and customer profitability reporting and analysis
- The integration of managerial accounting with other enterprise and corporate performance management (EPM/CPM) methods (e.g., the balanced scorecard, incentive compensation, risk management, supply chain management)
- The shift from historical reporting to predictive accounting (e.g., marginal / incremental costing; capacity-sensitive driver-based rolling financial forecasts, performance-based and driver-based budgeting, customer lifetime value [CLV] )
- Imbedding analytics into managerial accounting (e.g., correlation and segmentation analysis, recursive partitioning with decision trees)
- Acceptance of two or more co-existing managerial accounting methods
- Chargebacks to internal users and service level agreements of information technology (IT) and shared services
- Recognition of barriers slowing the adoption rate of advanced managerial accounting (e.g., resistance to change, being held accountable, weak leadership) to gain buy-in
Why you should Attend:
- Are our product and service-line costs accurate
- Do we properly “allocate” our indirect expenses (i.e., overhead) to calculate reasonably accurate product and service-line costs based on “causal” relationships? Or do we “butter spread” expenses with cost allocation factors simultaneously over- and under-cost products and service-lines
- Do we measure non-product channel and customer expenses (e.g., distribution channels, selling, marketing, customer service) to report profit or loss by each customer
- Do we know which customers are more attractive to retain, grow, win-back and acquire
For the more attractive customers, do we know the ROI from our different actions to achieve profit lift from them (e.g., price discounts, deals, offers, coupons) - How effective is our annual budgeting process? Does its benefit exceed the administrative effort and costs to produce it
- Is the budget out of date within a few months after it is published
- Do experienced managers “pad” their department’s budgets
- Is consolidating cost center budget spreadsheets bottom-up cumbersome
- Do we understand incremental / marginal expense analysis classifying the behaviour of our resource capacity expenses as sunk, fixed, step-fixed, or variable based on the planning time horizon
- Are many of our decisions based on intuition or experience rather than on fact-based data
- How much competency does our organization have with analytics
- How much resistance to change does our organization have that is slowing our adoption rate of progressive managerial methods
Areas Covered in the Session:
- How these trends have expanded accountants from “bean counters” to “bean growers”
- How to calculate profit and loss statements for customers displaying profit margin layers
- How to identify and differentiate strategic KPIs in a balanced scorecard and operational performance indicators (PIs) in dashboards
- How to perform “predictive accounting” for capacity-sensitive driver-based budgets / rolling financial forecasts,
- what-if analysis, and outsourcing decisions
- How to imbed statistics and analytics into product, channel, and customer profitability analysis
- How to overcome implementation barriers such as behavioral resistance to change and fear of being held accountable
Who Will Benefit:
- CxOs
- CFOs
- Financial officers and controllers
- Managerial and cost accountants
- Financial and business analysts
- Budget managers
- Strategic planners
- Marketing and sales managers
- Supply chain analysts
- Risk managers
- CIO and information technology staff
- Board of Directors