May 21, 2024

Handling the Complexities of Cost Management

Samuel Akinwunmi

Bilanc is here to help you pinpoint the costs associated with each customer, business unit, team, or product, enabling more effective cost accounting and management.

The Challenge of Cost Tracking

Sooner or later, someone in your organisation will inquire about the cost of servicing a specific customer cohort. For many, this question transforms cost analysis into a complex puzzle. The vast amounts of expense data housed in your general ledger can be overwhelming, leading to a labyrinth of tracking spreadsheets and database consolidations that often crash Excel. Despite your efforts to untangle this data, costs continue to rise, and critical questions remain unanswered.

As you attempt to gain clarity, you may find yourself requesting that engineering teams tag resources to understand compute costs, only to be diverted by new queries about customer service expenses. This cycle repeats endlessly.

Identifying Your Needs

Your goal is to comprehend the costs associated with unique customers, business units, teams, or products to better manage COGS, OPEX, and other financial metrics. Initially, you might have treated the cloud bill as a single cost center, but with increasing reliance on AWS or other services, a more detailed understanding of costs becomes essential. You need an innovative approach to control and understand costs effectively.

Proper cost allocation is fundamental for assessing the real performance and efficiency of large-scale operations. Yet, for many, this task is daunting and often feels like an insurmountable challenge.

Common Approaches to Cost Management

Today, the most straightforward analysis involves averaging cost data over daily, weekly, or monthly intervals. This process can take hours and involves extensive coordination among finance, engineering, product, marketing, and customer service teams. Any inconsistencies in the analysis can lead to disputes and distrust in the numbers.

Many resort to "peanut butter" spreading costs evenly across customers, products, or teams. While this method is not precise, it’s a compromise many accept to avoid the hassle. However, this can result in discrepancies in cost reports across departments, leading to frustration and finger-pointing, with no clear resolution.

Envisioning a Perfect Solution

Imagine a single, trusted source for real-time, accurate cost data segmented by business unit, team, product, feature, and customer. Picture having a true understanding of operational costs, enabling you to predict and prevent cost anomalies, manage products and features against sales outcomes, and swiftly adjust to market changes.

Now, think about achieving this level of insight continuously. Immediate, precise analysis streamed to the right stakeholders could transform your business operations. What if a technology could automate the distribution of expenses across customers, aligned with your organization’s financial principles and goals?

Steps to Achieving Cost Management Excellence

  1. Unified Cost Allocation: Develop a method to accurately distribute costs across customers and teams, ensuring everyone operates from the same data foundation. This requires collecting, normalizing, and streamlining extensive granular data.

  2. Timely Information: Ensure that data is accurate, easy to understand, and available in real-time. Quick access to reliable data is essential for making impactful decisions.

  3. Granular Insights: Obtain detailed and rich data to drill down into different customer segments. While the data exists, leveraging new technology to make it useful is crucial.

  4. Anomaly Detection: Implement systems to detect anomalous behaviors and trends, keeping operational costs within control. Understanding the direct link between costs and system behavior is vital.

  5. Automation: Automate the entire process and deliver insights to various stakeholders. Empowering teams with clear visibility into their operational costs enhances their ability to impact business outcomes.

Excel Just Isn’t Enough

Excel, despite its versatility, cannot handle the complexity and volume of data needed for effective cost management in large-scale operations. Embrace a solution like Bilanc to streamline your cost management processes and drive your organization towards financial clarity and efficiency.

Samuel Akinwunmi