By Shak Akhtar, SVP Finance Automation/Customer Experience Officer, Redwood Software
In this episode from our series of SAP-focused finance podcasts, we look at the challenges around cost and revenue allocation in SAP and how to tackle them.
This area of finance impacts product pricing and profit margin. It includes the collection of all the multi-level direct and indirect costs that need to be allocated to a cost center and then calculating what portion of that total cost should be attributed to each product or service to be sold.
In the podcast, technology writer and editor Andy McCue talks to finance transformation expert Adrian Li, who has more than 20 years’ experience designing, building and running SAP ERP in both large and small organizations, and across many industry sectors. Topics covered include:
- The complexities and dependencies of the cost and revenue allocation process and the issues this creates for finance teams
- Why SAP alone can’t manage the multi-level flow of costs and make sure everything flows correctly
- How finance automation orchestrates and maps the whole end-to-end process and dependencies
- How this helps reduce errors and manual effort, accelerates the close and ensures accurate costs are calculated
In the podcast, Li says: “Getting this right is fundamental. Product costing is really important in setting realistic pricing where you know you are going to be making the margins that you aspire to make. The real challenge is making sure you do the allocations and apportionment of costs in the right sequence and at the right time. It has to be manually broken down into multiple steps, with checks and balances at the end of each step before you move onto the next level.”
Finance automation allows organizations to map and execute the whole end-to-end process: “It not only eliminates that potential latency of having to wait for each step to complete in a dependency chain but also eliminates a lot of that manual effort in managing and executing the process too. And that will give you an accurate and reliable cost of products and services,” explains Li.
Find out how automation can relieve your SAP finance pains. Listen to the Redwood Finance Podcast now.