When it all comes down to it, the most important measurement in business is company profitability. A company may be setting sales and revenue records, but if it isn’t profitable, nothing else matters, and the situation could indicate there are serious problems within a company.
Most financial systems offer the capability to view a basic P&L and income statement profitability at a macro level, providing information about how the company as a whole is doing. To really examine company profitability, however, you need to be able to slice, dice, and drill down into the details to really understand company profitability at the micro level. A robust, integrated ERP system allows you to do just that, comparing data for strategic decision making.
Compare by Segment
Companies can examine their profitability in many different ways, including product line, product class, subsidiary or location, customer group or customer segmentation, sales team or sale rep, or project/project categories.
Think about a sporting goods store with different departments: hunting and fishing, sports, and fitness. A robust ERP system would allow the company to compare how the hunting department is doing compared to sports. How does the basketball department’s sales and profitability compare to softball, baseball, and football? Management also has the capability to compare how stores in Denver are doing compared to stores in Chicago, New York, or any other location.
An integrated ERP system also allows the sporting goods company to examine data by customer groups or segments such as strategic accounts for high schools and colleges and study sales and profitability by customer account.
Companies also have the ability to study their sales by product line and compare time periods such as last month to this month, quarter versus quarter, and year versus year. If they prefer, they can also compare actuals against budgeted amounts.
Profitability by Segment
While examining data by particular segment or category a robust, integrated ERP system also allows for analysis by units sold, average rate/sale price, total revenue and actual costs providing a simplified way to determine the most profitable areas of business. The result is the ability to make strategic decisions about marketing and sales on higher margin items.
Cost and Profitability Analysis
Another key component of profitability is analyzing cost and profitability by categories such as customer, location, or product line. Are costs trending up or down? Management can quickly view the data, review the trends, and take action.
An Integrated Solution
There is so much data about your business for you to harness. Are you capturing and using this information to your advantage? Contact goVirtualOffice to learn more about how you and your company can benefit from a robust, integrated ERP system.