This is the second of a series of LinkedIn posts where Paluma answers the question: “How efficiently can you track the profitability and cost management of your services and operations?”. The previous post is available in our Blog and LinkedIn pages.
SAP Profitability and Performance Management (PAPM) is a tool built on SAP HANA which empowers teams and decision-makes on the decision-making process.
By using existing SAP and/or non-SAP data, it allows to understand, control and manage costs drivers and how value is generated and can be optimized.
One of the most common uses of PAPM is the cost allocation. Here it is presented a cost monitoring program scenario.
Global company MS is a global entity present in 4 geographical areas, with 43 offices worldwide. Part of its Opex (15% as of Jun2019, circa CHF100m) is cost run by the HQ.
The detailed is presented below:
MS allocates the overheads to its local operations using a waterfall structure:
More recently, MS started a cost monitoring program and now plans to narrow salary gaps after media pressure.
The allocation process supports the pursuit of those goals:
- Infrastructure ⇒ country’s headcount as proxy
- IT Service Desk ⇒ charges (number of minutes) per call to IT Service Desk
- HR Costs ⇒ Salary x Salary GAP x Headcount as a proxy
- Admin expenses ⇒ Operating expenses
In order to speed the process and reduce effort and risk of the manual solution in place, MS decided to adopt SAP PAPM. How will this tool use its features to address MS objective efficiently?
Please stay connected to access next week’s second part of our Cost allocation / monitoring program Case Study.
We at Paluma have an extensive track record working with CFOs and supporting organisations in Europe successfully digitalise finance functions, leverage analytics and ensure compliance with new accounting standards. Therefore, we can advise your business with the best solutions to fulfil your goals.
By André Almeida