1/9/2012 3:48:00 PM
QUESTION: I am looking for a software service that allows me to track customer and product profitability. I work for a SaaS company and we are trying to track engineering and marketing time along with any direct expenses attributed to a particular customer or product. Since labor is the biggest cost, we are looking to track employee time at a very detailed layer.
What I am looking for is a system that does the tracking and then feeds into the overall system, so I can measure profitability against a specific customer or product. Ideally, I just want the "one-press-of-the-button" concept. I know there is stuff for manufacturing, but see no solution that handles more SaaS service-oriented (non-consulting) companies. Any advice?
ANSWER: In my experience, some challenges require business trade-offs, especially given the reality of available solutions. While anything is possible, the benefit you receive from tracking this information needs to be business-reasonable to collect, and it also needs to fit with your company’s culture and realities.
Take product cost for example. The challenges of tracking engineering time to a specific end-customer and product line is monumental -- unless your company does only very large sales to a very few customers. Obstacles include: accurate time-capture for employees’ timing differences (the time lag between events and labor cost and the revenue to be recognized) and matching challenges. Some of the expenses will be cost-of-goods-sold (COGS), which is matched by definition to revenue. Some of them will not be tracked as COGS – and would be challenging to track as COGS (both from a GAAP and a management perspective).
A solution that provides value while considering some of these challenges is a product line P&L. Revenue, COGS, engineering time and marketing time are all tracked to a P&L by way of an account code or other financial designation. The period of time considered is usually 3-5 years for analysis – allowing for R&D or other engineering and marketing costs to be captured along with the overall revenue and margin created.
- Bob Scarborough, President and CEO, Tensoft