Dear CFO…
Digital transformation is a reality – and if you ask me, I will say that it is always healthy to challenge the way we run our businesses by questioning our traditional perceptions of workflows.
Digital tools lead to new methods that simplify our work-life by optimizing tasks like employee expense registration and enhancing our understanding of employees, the company, customers, and partners – especially in terms of profitability.
We should reevaluate how we allocate costs between departments, projects, and, importantly, customers. Finance receives and distributes various costs, and I believe smarter workflows with technology can yield more accurate results.
I’ve said it before. Today’s CFO is more than an administrative role, primarily handling traditional accounting and reporting. You are also a problem solver and advisor contributing to strategy. By embracing fintech, you can more easily analyze profits on customers and activities, and who wouldn’t want to present a complete profitability picture at the customer level?
The real overview
Activity-Based Costing (ABC) is a well-established method for allocating main costs to specific activities, such as a particular customer.
To identify which customers are profitable, it’s necessary to include all types of costs, from customer service levels to consultant hours and employee expenses.
A true picture of a customer’s value requires detailed data about each cost – large and small – which can be challenging if finance’s data handling isn’t straightforward and transparent. Effective management means having systems in place to accurately capture and allocate costs, where digital tools are crucial.
Digital handling and dimension control
With a digital system that handles cost registrations like employee expenses, mileage and time related to a specific customer, it is possible for you to shift the accounting task to an end user or approver.
You can choose the dimensions, meaning a cost can be allocated simultaneously as the end-user records it. Responsibility for cost splits – whether by percentage or amount – can also be decided by you and be moved to the end-user, approver, or finance.
But why move the task of allocating and splitting away from the finance department?
Shifting tasks from finance is of course not applicable to all costs, but in cases like travel expenses, it can be particularly relevant. This often substantial post might be overlooked in precise allocations but is crucial for a full understanding of customer profitability.
Costs like driving over Storebæltsbroen can be allocated by employees through dimensions as they are recorded, saving time and resources for the finance department since the necessary information is already available with the employee.
Always remember, that it is easier to allocate a cost when it occurs, rather than allocating it at a later point in time. However, it also requires a process and system to support and manage it accurately.
Your strategic co-player
A digital process can be your new strategic co-player when it comes to financial management. With simplified workflows and accessible information, you will be better positioned to advise the business on prioritizing customers, activities, and setting future goals.
Dimensional management and cost recording are key parameters for digital reporting on internal user behavior – both in past and real-time. Digital cost registration easily gathers behavior pattern data from departments or employees, simplifying control of employee expenses.
By leading the way of a digital transition, you are strengthening the company’s financial processes – and not least, your strategic foundation to guide and advise the business on profitability and future goals.
What’s not to like?
