Profitability Analysis

Do you know the answers to these questions?

• Who are your 10 most profitable customers?
• Which are your 10 least profitable products?
• Which is last years most profitable project in the group (across legal entity boundaries)?

The core of the Profitability analysis add-on module is to answer these questions and many more you will have. It does so by making virtual allocation postings into a special member of the Business Process dimension which will make it possible to get a fully multi-dimensional allocated report across a multi-company and multi-currency organization. Through the advanced account mapping features it is possible to do so even if the account and project numbering is inconsistent in your organization.

The insight gained in Profitability Analysis will aid you in determining strategic direction as well as correctly setting your assumptions in your budgeting and planning process.

For budgets this functionality is possible to apply in any Scenario. These Key performance metrics can be further be used to quality assure your budget figures and test them for validity.

1. Open the Profitability Analysis setup in the pcFinancials Excel menu.
   
2. Segment Selection: Select which Segments (dimensions) that should be enabled for this functionality.
   
   1. NOTE: This may include virtual segments defined as a part of the GL model. Example: In your ERP systems you may not have product as a segment. You may still add Product as a virtual GL segment in pcFinancials and use enable this to be able to do Profitability Analysis by Product.
   2. NOTE: Entity can also be selected. Example: For the purpose of Profitability Analysis you may want to allocate cost of an HQ company across all other companies.
3. Allocation Source Selection: For each included segment you need to select the Zero Profit Members (where all values will be allocated to other members).
   
   1. NOTE: This needs to be done for each Segment selected in 1 above.
   2. NOTE: Summary level items (aggregations) should not be selected. If they are selected by mistake this selections will be ignored automatically.
   3. Example: You would normally always select the NONE member here. In addition to this you will normally select all members that contains data that is not used for lowest level profitability calculations.
4. Account Method Selection: For each natural account (not aggregations) in your Income Statement you will need to select a Method for the profitability allocation. If not method or “NONE” is selected no Allocation will be performed for this account. Valid selections for the Method property of Account are:
   1. NONE
      1. No Allocation for Profitability Calculations will take place
   2. ACCOUNT
      1. Will base the allocation on another account for the same period.
      2. The additional PA_Account property needs to be set to the Account to be used as allocation base.
         1. NOTE: This Account can be a Statistical/ Virtual account.
      3. Example: A virtual HR_Alloc account is populated based on the cost data from an HR system. This account is then used as basis for Profitability Analysis of all Staff cost accounts.
   3. ACCOUNT_LY
      1. Same as ACCOUNT above but will base it on the sum of last Fiscal Year instead of current period.
         
5. Running the Profitability Analysis
   1. Profitability → Run Profitability.
      
   2. Make sure you check the Error log thoroughly for any configuration errors made before interpreting the data.
   3. Define your Scenario & Time, then click on “Run”.
      
6. Reporting: Now for the most exciting part - check out the reports. You can also create your ideal Profitability report templates.
   
7. Budgets: This functionality is possible to apply in any Scenario. Key performance metrics like this can be used to quality assure your budget figures and test them for validity.