Profitability Analysis: Capturing the Complex and Inconsistent Truth

Providing strategic insight into profitability for P&L owners is a primary focus for enterprise Finance leaders. This includes visibility of where costs are excessive, where the margins are largest and where opportunities exist to increase revenue. Unfortunately, this is not always as straightforward as Finance and business unit leaders would like it to be.

Legacy Solutions Increase Complexity and Reduce Accuracy

Why is this? Well, many organizations currently use spreadsheets or fragmented, legacy applications to analyze their profitability. Managing profitability across an organization with these fragmented tools is challenging and complicated by multiple factors such as significant differences per region or business unit. Without a single source of truth, there is a significant risk of error and this risk is especially prominent when disparate spreadsheets are used to collect and analyze profitability information.

When developing and managing profitability models, these complexities make it difficult to change parameters or adjust the analysis and frequently limit the extensiveness and accuracy of the model. Finance teams are often forced to spend excessive time administering and maintaining models which limits their availability to focus on business decision guidance.

Conquering Complexity in Profitability Analysis

At Agium EPM, we have developed a profitability analysis model in OneStream's Intelligent Finance platform that conquers the complexity Finance teams face in their analysis. Our main goal was to provide a flexible, user-friendly interface that empowers users to easily adjust and update their information to achieve higher accuracy and deliver powerful profitability insights. To enhance this ease-of-use, model calculations are built-into the system, so business-level users do not have to interact directly with the calculations and are protected from making changes to the model itself. With this method, profitability analysis modeling can be more sophisticated than with other tools while preserving an elegant user experience.

Figure 1 - Allocation Dashboard

Empower Business Users with the Profitability Analysis Dashboard

The interface consists of a dashboard (see Figure 1) where predefined parameters can be adjusted. Depending on the business requirements, these can vary from one parameter to a completely driver-based model. However, this is all configured to be easily manageable by users with access to the Profitability Analysis Dashboard in OneStream.

The organization can choose to either provide this level of access for headquarters only or to the lowest level of the business unit. This flexibility enables organizations to empower business unit leaders and provide them more tools to accurately analyze their profitability.

Integrate Profitability Analysis with Financial Reporting

While the solution can be a standalone model, it can also be integrated with financial reporting. In that way, the analysis can be done on the latest actuals and can be used to generate best/worst case scenario comparisons. Allocations can be executed on demand by users or be calculated along with the regular consolidation process of the organization.

Figure 2 - Allocation Audit Table

Either way, you always have the latest outcomes and up-to-date actuals. This speed in analysis enables relevant outcomes for decision-makers. Additionally, the model can be extended with audit trails (see Figure 2), specific security settings and additional reports.

Lead at Speed with Profitability Insights

With the profitability analysis model completely configured and integrated into the OneStream platform, users can conquer complexity in profitability management. They can easily change parameters via dropdowns and are empowered with an in-depth understanding of the profitability impact of changes in pricing, sourcing, service lines and product mix strategies when conducting profitability analysis and what-if scenarios.

For example, our client Carbery Food Ingredients implemented OneStream and Agium's profitability analysis model to replace more than 15 spreadsheets that were linked together to produce management reports. And they did this while creating a process that is completely transparent, using the OneStream Marketplace solution Workflows. This project management solution enables Carbery's Finance team to delegate tasks, manage progress and provides complete accountability with built-in audit trails.

To learn more about Agium's profitability analysis model and how customers are empowered in profitability management, visit the Agium Profitability & Management Reporting page. To learn more about how the OneStream platform empowers Finance teams to lead at speed contact OneStream today.