The topic of measuring profitability is broad, and due to many factors can be complex.
However, accurately measuring profitability is imperative, especially in business environments experiencing (rapidly) changing conditions. Those companies that accurately measure profitability can realize many distinct benefits, including the ability to make better decisions.
Recently Deloitte released their 2014 Q1 “CFO Signals” Report. One notable aspect, seen on page 21, regarded the “visibility into profitability.” Respondents were asked about this visibility among various layers, ranging from the overall company level to customer level. Below is the graphic included in the report:
Of course, many different factors can present challenges to accurately measuring profitability at these various levels. One such challenge – discussed in the aforementioned “CFO Signals” Report – is cost allocation. An array of other factors can potentially pose challenges, ranging from inaccurate gauges of revenue to poor IT systems.
ProfitabilityIssues.com is published by StratX, LLC (stratxllc.com). StratX, LLC is a management consulting firm and strategic advisory that focuses on the analysis of current and future business conditions, and given these conditions, offers corporations and businesses advice, strategies, and actionable methods on how to optimally increase revenues and profitability.