How do you measure profitability by client, project or product?
Efficiency question :
Before measuring profitability by client, project, or product, it is necessary to understand and properly structure the available data.
Well-structured data opens the door to more advanced calculation features that make it possible to analyze results according to different criteria. Revenue and expenses can then be grouped by client, project, or product to measure profitability more easily.
The Management Reports course offered by SLV Expert teaches, among other things, how to structure data to make this type of analysis easier.
Key considerations:
Once data is properly structured, more advanced formulas, including array formulas, can be used to apply conditions to specific columns and obtain the desired results.
However, the quality of the analysis depends directly on the integrity of the data used. Data from an automated system, such as a general ledger or sales system, generally provides greater consistency than manually entered data, which may contain errors.
Before analyzing profitability, it is therefore important to consider the source, quality, and integrity of the data.
Challenges:
All data required for the analysis must be available for the same period.
For example, all sales and revenue data may be available while some of the corresponding expenses are still missing. The result would then provide an incomplete picture of profitability.
The effective date of the analysis is therefore important. Before producing the report, make sure that revenue, expenses, and all other required data are complete for the period being analyzed.
Technology:
Microsoft Excel is particularly well suited to creating reports for analyzing profitability by client, project, or product.
It can be used to build reports tailored to the organization's needs, incorporate graphical elements, and compare results against different benchmarks.
Current profitability can, for example, be compared with the previous year's results, a prior quarter, or the budget established at the beginning of the year.
Excel therefore makes it possible to combine calculations, comparisons, and presentation of results in a single report.
Developer's advice:
Array formulas can become resource-intensive when applied to a large volume of data. In this context, macros and VBA can be considered to automate report creation and calculations.
A programmed procedure can also make the report more dynamic. Clients, projects, or products with no relevant activity during the period can be removed automatically so the analysis focuses on items that actually require attention.
Once the report has been generated, results can also be sorted automatically so that the most significant variances appear first.
Finally, favor a presentation that fits on one page in width, even if the report extends over several pages vertically. This structure makes the report easier to read and allows results to be compared without having to navigate horizontally.