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I look forward to presenting at the Controlling 2015 conference September 21-24 in San Diego. I am passionate about management accounting. My belief is there is much opportunity for accountants to improve the quality of information they provide to internal users to support better decision making.
Many organizations are far from where they want and need to be with improving performance, and they apply intuition, rather than hard data, when making decisions.
I would like to believe that the reporting of more accurate product and standard service-line cost and profitability information using activity-based costing (ABC) principles is now common. ABC accurately traces expenses into costs with resource and activity drivers and provides cost visibility that is traditionally hidden. Sadly, however, many organizations continue to use a single indirect and shared expense “pool” that allocates resource expenses into costs based on a single cost factor, which violates cost accounting’s causality principle.
Customer profit and loss (P&L) information quantifies what everyone already may have suspected: Customers who purchase roughly the same volume and mix at similar prices aren’t nearly the same when it comes to profit. Some customers may be more or less profitable based strictly on how demanding their behavior is on a supplier. Customer P&L information also provides cost visibility and transparency when it comes to the business processes and work activities that cause the higher or lower costs – the cost drivers.
I look forward to addressing these issues (and more) at Controlling 2015 with the intent to educate, and hopefully inspire, accounts to improve their costing practices. Learn more about my session How costing integrates with enterprise performance management (EPM).