Finance Insights

Business Profitability Analysis Beyond the General Ledger

Posted by Dan Franceschina on August 21, 2017

Business Profitability Analysis Beyond the General-LedgerCompanies are always seeking new ways to analyze their business profitability to discover how they can gain a competitive edge in the market. 

The general ledger and the financial statement have traditionally been the go-to source for analysis of financial performance. But in today’s ever-changing and competitive market landscape, many organizations are now finding that process to be limited and not holistic in offering a broad view of the organization’s financials.

Profitability analysis, however, can be a very powerful management tool that gives business leaders the ability to respond to market opportunities, hone in on their most valuable customers or product lines, view trends, or prune their portfolio of unprofitable components of the business.

These analytical technologies often can give surprising insights into an organization that may actually run counter to industry wisdom. It is often these insights that can drive the greatest value and provide the best opportunity for organizational learning.

Systems for deeper and strategic profitability analysis 

Organizations are turning to profitability analysis systems to gain business intelligence beyond what they would usually get from simply reviewing the general ledger. These systems typically have the capability to offer more specialized views of data, such as:

  • Summary Data- for customer and product profitability by market channel or product family
  • Granule Deep Dives- for individual products or customers

They also offer more industry specific data views and profitability analysis that go beyond general ledger information, such as:

  • An examination of an employee or group practice for a law firm
  • Or an analysis of each sales representative or sales group to determine the effectiveness of marketing and sales resources to understand profitability from these departments

These type of analysis systems can also assign revenues or expenses to data elements where there is not a direct link, such as the cost assignment of shared services like finance or IT to individual market channels or customers. Typically, these assignments are called shared service allocations and can run from simple to highly complex calculations.

Customized tools for greater profits analysis

Many manufacturers and large corporations use sophisticated, enterprise-wide, operational technologies that collect and manage various types of information for profitability analysis. However, if other organizations don’t want to invest in such an expensive, complex system, there are several items they should address before developing their own effective approaches to company profitability analysis.

Some hurdles they may face when developing new profitability analysis techniques include:

  • Development of allocation manager methodologies that accurately reflect the expense or revenue assignments needed for the data category
  • A system that can handle the vast amounts of enterprise data sets profitability analysis requires as well as calculate allocations quickly and efficiently
  • The ability to provide transparency to end users and analysts in regards to cost assignment and revenue assignment and the drivers used to make those
  • The ability to create an effective, efficient reporting process that provides both standard and ad-hoc analysis capabilities
  • Affordable implementation and configuration costs for the software
  • Affordable ongoing maintenance costs

Emtec has developed a proven profitability analysis process, templates and reports that can handle even the most challenging requirements. This intellectual property utilizes best-of-breed Oracle on-premise and cloud technology, (i.e. Hyperion, PBCS and more), as well as our experts’ vast finance process knowledge and profitability analysis experience. The solution is customizable, easy to maintain, fast, and has tremendous reporting and analysis capabilities.

If you are looking for a simple way to begin evaluating profitability deeper than the general ledger, we would love to talk to you about your profitability challenges and show you how you can get started quickly. Contact us today!

Topics: .Finance, PBCS, Oracle Hyperion, Profitabilty

Watch on Demand - Modernize Your EPM Investment for Optimal Performance 

Search the Blog

Get Finance Insights in Your Inbox

More Emtec Insights