Profitability Improvement Strategy

Financial Services

The situation

A client in the financial services industry had been struggling with an outdated costing model which did not consider the actual drivers of cost for serving various clients.  This was further complicated by the group's lack of cost understanding which affected pricing and client profitability.  DBA developed a new and customised activity-based costing model which helped the group increase their profitability by R8.6M.

The DBA involvement

 

We analysed cost categories, activities and drivers.

 

  • Reviewed cost structures and operational activities

  • Conducted interviews, observations and analysis to determine actual drivers of cost elements

  • Allocated costs to activities and quantification of drivers

  • Developed model pricing rules

Key outcomes

  • Easy to use, updateable cost and price model

  • Built-in functionality to conduct cost category, cost driver, and profitability analysis across client base

  • Automatic analysis of individual clients and comparison between clients

  • Generation of quotes showing cost-to-serve new clients and recommended pricing

  • R8.6M in profitability improvement from changes to price-service structure