Agile profitability management is vital to success in today’s volatile environment. Are you ready?

Finance leaders have long been focused on leading through business and market volatility. But Covid-19 brought a tidal wave of volatility that few finance leaders were truly prepared for. Not only were most finance teams forced to work remotely while keeping core processes running, but they also had to manage the business through a host of unforeseen events. Some saw steep declines in demand, especially those based on personal contact with customers. Others experienced huge and unpredictable spikes in sales. Meeting this demand was further complicated by raw material and labor disruptions, breakdowns in extended supply chains, and rising commodity prices.

When facing such challenges, finance leaders must play an expanded role in strategic decision-making. For example, they need to carefully evaluate the costs and profitability of their business at a granular level, as well as uncover data-driven profitability insights, opportunities for growth, understand and manage risks, the levers impacting performance, and how the business can maximize performance. This requires having the right information and insights at the right time to make informed decisions about where to invest and which customers and products to focus on. Equally important, they need to understand how to reconfigure their supply chains to be more cost-efficient and agile – for example, regionalizing them rather than depending on more fragile global supply chains.

These are big decisions and strategy changes that can determine the future success of your business. And they drive actions that can have an immediate impact on the survival of a business, as well as its financial health and sustainability going forward. To make the best decisions, finance leaders need a way to combine, model, and analyze relevant financial, operational, and external market data so they can discover insights in real-time, as business happens, and even model the future with advanced predictive analytics.

Put simply, volatile times require companies to make data-driven decisions quickly. This requires embedding data and analytics into decision-making and engaging in multidimensional profitability management based on the latest data.

And yet, too many finance leaders get access to their finance-related information weeks after the fact, preventing proactive decisions and business leadership. It’s not uncommon for cost transparency to take months to achieve. For example, ever-evolving demand data made available too late for finance to work across the extended enterprise to ensure the business can ramp up production in time to meet it.

Spreadsheets and many simple cloud-based point solutions don’t provide the breadth and depth of insights that are needed today. As a result, business leaders can’t make informed decisions because data analysis relies on high-level data, is slow, and cannot keep pace with the speed of business change. Those outdated tools rely on high-level indicators and assumptions that typically don’t reflect real conditions, leading to less informed or, even worse, incorrect decisions.

As one example, it is well known that 20% percent of customers typically produce 80% of profits. The typical assumption that the highest volume customers are the most profitable is often far off the mark.  Having insights into the actual cost incurred to serve a specific customer often proves that assumption wrong.  That leads to decisions that hurt profitability by, for example, offering those large customers further discounts or access to expensive marketing programs. In reality, the company should be working with those unprofitable customers to make them profitable and focus their marketing or other investments to help grow the profitable ones.

What’s needed is an enterprise-ready solution that supercharges finance with agile profitability and allocation management capabilities. Ideally, finance needs a solution to model granular data allowing them to confidently analyze financial and operational results – all with connected, intuitive workflows and minimal IT involvement. Business-led. Big Data. High-speed calculation capabilities. Granular, even transactional-level detail. Ability to collaborate across the business. Powerful and flexible scenario analytics and optimization using predictive analytics to model most likely outcomes. And real-time reporting. All with flexible configurability to meet unique business needs across all a company’s most critical business processes and decision cycles.

As explored in our SAPPHIRENOW track session IND600, SAP Profitability and Performance Management delivers all this and more. This native SAP HANA solution maintains and executes complex calculations, rules, and simulations. It is highly flexible with no set data model and enables you to create high-speed profitability and cost analysis with minimal IT involvement. You define the data sources – both SAP and non-SAP – and dimensions you need so you can:

• Build relevant profit and performance models down to the levels of customer, product, channel, or any other relevant dimension
• Automate complex allocations while generating valuable analytics
• Calculate massive volumes of data in seconds and perform “what-if” or sensitivity simulations to generate actionable insights rooted in sound analyses
• Make decisions confidently and test and review their impact before finalizing them
• Align processes with profitability and performance by integrating calculated results into defined close activities, planning cycles, visualizations, and execution
• Unite heterogeneous, custom-specific business calculations in one solution, enabling greater trust in models and results

Now is the time to evaluate your approach for profitability management and explore how SAP Profitability and Performance Management, deployed by the experts at msg global solutions, can help your business win with agile profitability management designed with finance users in mind.