An allocation is defined as “the action or process of distributing something.” In business terms, this typically entails the movement of costs. Some companies have a rather straightforward approach to allocations. Others need to incorporate a level of complexity to their allocations.
A Revelwood client in the healthcare industry asked us to create an allocation model for their IBM Planning Analytics environment that allocated a series of product costs to territories and customer combinations to each of its product entities. The organization has multiple entities, such as commercial products, Medicare products and Medicaid products.
First, we built a reporting model, followed by a planning model. Then we approached allocations.
We tackled this challenge by designing a Planning Analytics model that allows the company to calculate allocation percentages applying a series of methods. These methods included:
- Using a standard allocation approach to calculate a percent by a driver
- Defining a percentage for a single product, then allocating the remaining percent to all other products
- Defining percentages to existing subsets of products and then allocating those percentages to specific products within each group
- Defining a percentage to an ad-hoc subset of products and allocating only to those products
- Incorporating various combinations of these methods
This Planning Analytics allocation model calculates allocation percentages in a faction of the time that was previously needed. It then uses the calculated percentages to allocate various expenses by entity, customer, product, territory and more. The model offers the financial team the flexibility to use a allocate a series of independent expenses using a variety of drivers and approaches. This unique approach allows the team to separate the allocations into pieces and analyze the details throughout the process. Allocations that previously took the organization days to define and calculate can now be done in a matter of minutes.
Do you have a complicated allocation process that could benefit from greater efficiency? Contact us and we can discuss it.
