markbland.com

Contact Me | Request Help
Home
Resume (pdf) | Get Acrobat Reader
Competitive Operations | Capability Analysis | Process Mapping | 6 Sigma and Lean | Project Management | Play Factory
Outsourcing | Supply Chain | Profitable Customers
Production and Operations Management | Lean Enterprise Institute | 6 Sigma Academy | Theory of Constraints | Project Management Institute | Smart Draw
Photo Album

Profitable Customers

Activity Based Costing

Are some customers more profitable than others?

Consider two customers both spending $10,000, buying the same products from you. One customer is always ringing up your sales team, asking questions, demanding reassurance, the other is all ready confident and knowledgeable about the products they are buying. When it comes to paying the first customer is slow and requires constant calling and eventually pays just before legal action is taken. The other customer pays on time, electronically and your accounts team spend no more than 2 minutes on that account. Using traditional accounting methods the products have the same contribution to profit as the costs of running the sales department and the accounts department are evenly spread across all customers. Using activity based costing (ABC) you would know that one customer takes up more of your time than the other and so the profit margins for each are different.

Articles

Are all your customers profitable?, Gary Cokins, SAS, September 2002


 

About Me | Contact Me | ©2005 markbland.com