Understanding the cost of the products and services you supply to customers is vital to the profitability of your business, and failure to understand all the costs and how they behave as customer requirements and demand changes can lead to poor business decisions. This in turn can threaten the success of your business.
We can work with you and bring tools and techniques that make the true cost of the output your business delivers more easily understood. This will support pricing decisions and help you to make difficult decisions to manage cost.
In service industries there is often a wide product range, and the chief cost is people, who frequently work across a portfolio of products and customers. In this situation its very easy to cost the effort needed to deliver individual products or outputs incorrectly. If one service is overpriced, in effect subsidising the cost of another that has been underpriced, a fall in demand for that service can be disastrous. Accurate Output Costing can prevent this happening.
The business needs to be agile, and understand what drives the cost of each customer output, and when the cost driver changes understand the impact of this. We have worked with many clients to design costing models to inform pricing decisions and underpin service level agreements with customers. We use Output (or Activity Based) Costing techniques to cost the activities that combine to supply individual products and services. Often the cost base is complex, and the same resources contribute to a range of different customer outputs. The output costing model will take account of this complexity and allocate cost on an equitable basis.
Contact us to learn how we might be able to help build output costing models to support your commercial decisions.