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Know your costs! Know your Business!

A lot of businesses around the world have experienced tough times in the past few years but are now looking at new strategic initiatives to make the best of the next economic upturn. Executives need to identify the best opportunities to grow their businesses and for this you really have to understand the dynamics of your business, which areas make or loose money, which areas have the capacity to grow business profitably, where to invest or divest, which customers drive profit or are value destroyers.For this you need proper Cost and Profitability insight.

Problem areas may exist everywhere in the business, bad business processes, unprofitable products and customers, archaic supply chains that result in high cost-to-serve customers. The problem is management can often not pinpoint these issues and problems in their business. Businesses have become too large, too complex to easily identify problems.

This is where a good costing system can help! It will help identify those poor performers, focus attention on the problem products and customers, provide management with the FACTS to structure their business not only to survive the tough times but position it for profitable growth going forward. To make this work, you will need the technology that can handle your organisational complexity, provide insight into the issues that hampers the profitability. Our ValuMax costing system will provide you with the capability to analyse most of the business issues and make sense of the complexity in your business.

Cortell has recently worked with various businesses to help them understand their profitability dynamics. These include a Port, a Poultry company, a University, an Insurance company and many others. ValuMax has been a critical tool in unraveling these complex businesses and helping their executives understand their cost and profitability dynamics and identify strategic opportunities for profit improvement

Above all, you also need the costing methodology and know-how to make the costing system provide you the information required. You need a company that understands costing and the issues in making it work. Cortell will provide you with a sound methodology to make the project work for you, to provide you with answers to your pressing business problems.  

Knowing your costs will help you know your business. We believe this is a fundamental truth about business. Contact us today for an on-line demo or discussion of how we can help you make your business prosper again

More about ValuMax:

The ValuMax activity based costing product  will assist organizations to add VALUE, customer value, product value and organizational value.

Value is added when the revenue generated by a product, customer or the organization is greater than the cost of doing so. “Cost” is often misunderstood and twisted to serve user’s objectives and many business decisions are made based on incorrect cost, often with catastrophic results. 

We can help you get a clear understanding of all your costs, we have the technology and also the know-how to make costing work for you to improve your organization

We attempt with ValuMax to provide a transparent and as accurate as possible reflection of the true costs of products, customers, services and processes and through this to assist organizations to identify waste, to identify opportunities for growth and business improvement. The costing process can become complex due to the complexity of modern organizations and ValuMax has been developed to cater for this but also to keep the “cost-of-costing” low.

It is a sophisticated Activity based costing system that can not only handle complex, multi-company, multi-branch environments but because of its affordability, can be deployed for smaller organizations as well. For organizations that strive to deliver value using Economic Value Added (EVA™) concepts, the product can assist in making this an operational reality.

Why organizations need Activity based costing?

Accurate costing of Business activities is now more important than ever. The business scene has changed dramatically in the last few months and virtually every business has to re-assess its strategies for market positioning, growth or even survival. Most businesses lack quality information to assist them in evaluating and formulating such strategies.

Activity based costing (ABC) of business activities provides insight into the cost drivers that affect a business, will indicate which products or customers are not profitable and generally assist in the formulation of business strategies to survive and become a better business.

Activity based costing is a technique that can be deployed by organizations to determine:
    ·     Which products or customers are more/less profitable or do not add value, to focus marketing or
            even cull products
    ·     Which marketing or distribution channels are not delivering the required returns and may
            require changes
    ·     What the impact of different levels of capacity utilization will be particularly with reduced
            demand, fully understanding resource consumption
    ·     True fixed and variable costs to assist with pricing policies for the tougher economic times and
            to use this for effective budgeting an planning
    ·     Understanding the costs “below the line” such as Supply Chain costs
    ·     What functions or activities to outsource in order to cut costs

Activity based costing can be applied in virtually any industry including manufacturing, services, logistics, chemical, pharmaceutical, educational institutions, hospitals, etc. It typically is most useful when a large number of products are delivered or many customers serviced or the organization is very complex and it is difficult to understand the reaction of costs

Activity based costing is logical and common sense and need not be an expensive exercise to measure costs accurately. But is requires a good methodology and the right technology to make this work and can yield a fantastic ROI by identifying unprofitable areas of the business, poor productivity, the impacts of low capacity utilization and even facilitate good benchmarking.

When business is good, few businesses concern themselves with cost cutting or cost management but when the tide turns, costs become the major focus. The problem is most organizations then do not know where to start and may do more harm than good, cutting capacity, capability and often create so much instability that the business falters.This is where activity based costing can help.

ValuMax provides answers to most of the type of issues described above

Types of decisions supported by a ValuMax implementation

   ·   Drop or add products/customers
   ·   Outsource activities/functions

   ·   Build new facilities/factories

   ·   Supply chain modeling
   ·   Mergers and acquisitions or rationalization studies
   ·   Activity-based budgeting

   ·   Contract negotiation

   ·   Evaluation of marketing or distribution channels



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