Calculating Cost of Sale
The life of a Finance Director isn’t an easy one. Whereas every other department is focused on targets and spending, the Finance department in complete contrast is focused on minimising one thing – cost. This will inevitably lead to friction, but the Finance Director’s job, though probably not appreciated by other managers, fulfils an important part of the business machinery.
As a financial controller the objective of the FD is to be the voice of reason, to calculate costs and apply financial clarity to what would otherwise be a limitless amount of spending. What the FD considers prudent, other departments will undoubtedly consider a cap on resources. Yet, does it have to be this way?
The trouble in many cases with financial planning is calculating the risk element between spend limit and over expenditure and the degree of prudence in which finance departments exert constraints on the rest of the business. This boils down in some part to not understanding the full cost of sale. In understanding exactly the cost performance of sales and the returns of different department efforts, there is less need to perform restrictive practices. How can this be achieved?
Again, historical analysis is the key to understanding the performance of any particular part of a business from the functions of individuals, departments, territories or products. Individual sales targets are simple enough to calculate but understanding the cost of the process in which targets are achieved also affects the FD’s financial powers. In developing SymVolli, FD’s can use their knowledge of the business process as a whole in developing financial strategies that are even more realistic to the business.
SymVolli won’t make Finance Directors more popular, but it will give the FD more flexibility in answering the business needs of different departments.