Cost Allocation Engine
What Cost Allocation
One of the commonly irritating problems in most organizations and especially in the banking sector is how to distribute employment and operating expenses over profitable products or lines of business to have accurate measures of the net financial revenue for the organization.
Allocating those expenses while having an indirect relationship with the profit cost centers is the dilma here, while having generic cost centers serves the whole organization makes the distribution of those expenses harder or having inaccurate allocation which results in misleading vision over the different organization departments performance.
Cost allocation engine is the solution here coming with an easy user interface with dynamic configuration capabilities which allow the organization relevant users to define a set of allocation rules of all expenses and all cost centers and distribute those expenses till reaching the profit centers or profit products with configuring a various dynamically calculated drivers which helps having an accurate cost distribution and detailed analysis reports for those allocations to have real acquaintance over departments performance while allocating their cost whether direct or indirect costs with reasonable and justified methods.
Profitability implementation will model profitability from customer account level and all the way up till reaching product, branch, line of business and total organization profitability. Results will be reconciled to the ledger to ensure directional accuracy, the objective in developing multidimensional account level profitability is to measure economic profits without distortion due to short term fluctuations in total organization income and expense.
Organizational units (or cost centers)
- Governance, which are those that provide activities of control, coordination and direction in the interest of the whole Bank.
- Service, which are those that provide support to the business. They usually provide standard and homogenous activities that can be measured in order to determine their cost and the price for service recipients.
- Business, which are those dedicated to business (products, customers, portfolio etc.) development and that are usually measured in terms of revenues.