Articles
Cost to serve and profitability, worked through.
Practical articles for finance teams, each built on an example you can check with a calculator.
How to calculate cost to serve per invoice line
A worked example of allocating sales cost to invoice lines with a composite weight, and why a one-line order can cost 3.75 times more per line.
Read the articleReceiver caps: why clamping once gives the wrong answer
When an allocation caps what a receiver can take, the overflow has to go somewhere, and it can push another receiver over its own cap. A worked example.
Read the articleReciprocal allocation: algebraic or iterative?
When a department receives part of its own cost back, allocation becomes circular. Two ways to solve it, with the same 120,000 pool worked through both.
Read the articleWhy a relationship P&L needs cost to serve
A commercial banking example: four relationships, four activities, and a client that brings in 240,000 of revenue and costs 245,000 to serve.
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