Jun 27, 2024

How to Get Started with Calculating Profitability at the Customer Level

Samuel Akinwunmi

Finance professionals often struggle to gain deep insights into their company's profitability, especially at the granular level of individual customers. While traditional financial analysis focuses on overall budgets and forecasts, modern finance teams need to dive deeper to truly understand what drives their business's success.

This is where Profitability Intelligence comes into play, and it's exactly what we specialise in at Bilanc.

What is Profitability Intelligence?

Profitability Intelligence is a method of calculating the profit generated by each individual customer or customer segment. It goes beyond traditional financial reporting by combining data from various sources to provide a comprehensive view of how each customer contributes to your bottom line.

Benefits of Profitability Intelligence

For forward-thinking finance teams, understanding profitability at the customer level offers several key benefits:

  1. Identifies Your Most Valuable Customers
    By allocating costs and revenues to specific customers, you can easily identify which customers are the most profitable. This information is crucial for strategic decision-making and resource allocation.

  2. Reveals Hidden Costs
    Some customers may generate high revenues but also incur significant costs that aren't immediately apparent. Customer-level analysis helps uncover these hidden expenses.

  3. Informs Pricing Strategies
    Understanding the true cost of serving each customer allows you to refine your pricing strategies to ensure profitability across your customer base.

  4. Guides Customer Acquisition and Retention Efforts
    By knowing which types of customers are most profitable, you can focus your marketing and sales efforts on attracting similar high-value prospects.

  5. Improves Resource Allocation
    With clear insights into customer profitability, you can make more informed decisions about where to invest your company's time and resources.

How Bilanc Enables Profitability Intelligence

At Bilanc, we've developed a Finance Analytics platform that makes it easy to calculate and analyse profitability at the customer level. Here's how our solution works:

  1. Data Integration
    We connect with your existing ERP systems to import financial data automatically. But we don't stop there – we also integrate with systems that track customer interactions and engineering data, providing a complete picture of your business operations.

  2. Flexible Cost Allocation
    For every expense ingested into our system, users can specify exactly how to allocate those costs to events, customers, or transactions. This level of granularity ensures accurate profitability calculations.

  3. Real-Time Calculations
    Our platform performs all calculations in real-time, giving you up-to-the-minute insights into your customer profitability.

  4. Interactive Reporting
    Visualise your data through customisable dashboards and reports, making it easy to spot trends and share insights across your organisation.

  5. Scenario Modelling
    Run "what-if" scenarios to understand how changes in pricing, costs, or customer behaviour might impact profitability.

Getting Started with Profitability Intelligence

Ready to dive into customer-level profitability analysis? Here are the steps to get started:

  1. Assess Your Current Data
    Take stock of the financial, customer interaction, and operational data you currently have available.

  2. Define Your Objectives
    Clearly outline what you hope to achieve with this analysis. Are you looking to optimise pricing, improve customer retention, or something else?

  3. Choose the Right Tools
    Select a platform like Bilanc that can handle the complexity of customer-level profitability calculations while remaining user-friendly.

  4. Implement and Integrate
    Set up your chosen solution and ensure it's properly integrated with your existing systems.

  5. Train Your Team
    Ensure that your finance team and other stakeholders understand how to use and interpret the new profitability data.

  6. Start Small and Scale
    Begin with a pilot project focused on a specific customer segment, then expand your analysis as you become more comfortable with the process.

  7. Continuously Refine
    Regularly review your allocation methods and assumptions to ensure they remain accurate as your business evolves.

By embracing Profitability Intelligence, finance teams can move beyond traditional reporting to become true strategic partners within their organisations. With platforms like Bilanc, this level of insight is now more accessible than ever, enabling businesses of all sizes to make data-driven decisions that drive growth and profitability.

Ready to transform your financial analysis? Contact Bilanc today to learn how we can help you unlock the power of Profitability Intelligence.

Samuel Akinwunmi