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RESULTS: How Achieved > Financial Traceback
- The ability to trace back allocated overhead expenses to the GL accounts from which they were sourced is important for at least two reasons:
- 1. At the GL level, expenses are often grouped into categories like Fixed or Variable. These designations are important because different types of expenses call for different tactical or strategic maneuvers, and over different time horizons, if those expenses are to be reduced or changed in some way. (It’s one thing to cut back on utilities or contract labor, quite another to sell a warehouse.) Therefore, in determining what to do with a profitability problem or opportunity identified in the VDDW, it’s important to know how much of the overhead allocated to the segment under question is attributable to fixed or variable expense categories.
- 2. As a sanity check in validating the output of the ABC allocation engine, it’s valuable to see how much of that segment’s expenses come from which sources. The breakout of contributed GL dollars should “make sense”.
- The diagram to the right illustrates how the VDDW displays the GL traceback for all the operating activities. The VDDW provides this traceback capability in ad hoc fashion along any dimension or combination of dimensions – by customer, supplier, product, location, etc.
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