Not all the data in the source systems incur at a transactional level or at the granular level on which you would like to track profitability, e.g. general overheads. Also, operational systems have limitations and the data as described in the source system is not always appropriate for analytical use, e.g. particular cost is assigned only to one organization unit, although it was incurred in several organization units.
PROFITability 5.16 provides different methods to reallocate costs and revenue to any dimension and breaks it down to any level.
Allocations are calculated automatically based on business input and data mapping. If required, manual correction is also supported.
Allocation keys are calculated measures that are used to allocate the costs such as no. of clients, no. of employees, no. of transactions, no. of square meters, gross exposure and risk-weighted assets. You can define any number of allocation keys that will be used in allocation rules.
Standard unit costs are a part of the indirect costs that should be managed as direct costs based on the time spent on the activities, which are a part of the standardised service process. With standard unit costs, you can allocate fixed amounts to each transaction or arrangement. E.g. you can assign 50 cents to each new retail arrangement and 80 cents to each retail and corporate arrangement closure. Or you can assign 10 cents to each ATM transaction and 30 cents to each over-the-counter transaction.
Allocation rule defines business logic for cost allocation, either through a complex multi-step allocation scenario or by simple logic, e.g. to either all arrangements or just to some arrangements that meet the chosen criteria.
A simple allocation scenario would be to distribute the cost of one organisation unit to all arrangements within the corporate business segment equally.
An example of a complex multi-step scenario would be to assign the cost to the business segments based on the gross exposure allocation key. Then from each business segment to the relevant customer based on the number of customers. And the last step would be to reallocate it from each customer to arrangements using the equal proportion key.