Demand-based Budgeting and Resource Planning
Each year your Sales and Marketing management set targets and forecasts for
next year’s sales. Meanwhile the Finance function sets targets and forecasts for
next year’s costs. How much connection is there between the two?
Your activity based cost model can tell you the average unit cost of:
 | Fulfilling a customer order |
| Maintaining a customer’s records for a year |
| Handling a product return |
| Training a new customer to use your ordering website |
A sophisticated ABC model will adjust this cost to allow for factors such as
product complexity or “key customer” status.
So the connection between next year’s sales and next year’s costs is easy to
make.
Except that it’s not just about sales. The business also needs to consider:
| Complexity of new products/services |
| Size of customer base |
| Customer churn rate |
| How many customers will switch to the new internet sales channel |
While your budgeting model can predict each department’s costs based on
demand, department managers can focus on different objectives such as:
| Planning how best to deploy
resource to match peaks and troughs in demand |
| Reducing the unit cost of major activities, by reviewing how they are
carried out |
| Negotiating cross-department improvements with other managers |
How we can help
We can:
| Identify the statistics that you need to forecast |
| Predict next year’s costs by department |
| Adjust for known changes, e.g. new buildings, new
processes |
| Predict where the pinch-points and the spare capacity
may be |
| Facilitate business
streamlining workshops |
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