From XU Magazine, 
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Business Unusual Series: #5 Track profitability of business units

If your business is comprised of multiple business units, then it may be helpful at this time to investigate the profitability of each business unit. In other words, to assess the individual performance of each department, location, profit center, divisions or any other business segments.

Breakdown analysis

The Breakdown analysis in Fathom enables you to drill deeper and gain insights into the performance of business units within your business. This chart lets you compare results for any KPI or any P&L / Balance Sheet account. Using this analysis you can easily observe important metrics and identify which business units are vulnerable or needing attention.

If there are precise areas of your business that require action, this analysis may help pinpoint this area of focus.

Chart-1-breakdown-analysis

Tip. This analysis uses tracking data from your source accounting system. Specifically , tracking categories in Xero, classes/locations in QuickBooks Online and jobs/categories in MYOB.

So in addition to monitoring the overall profitability of your business, Fathom also helps to track the specific financial activity, position and performance of your business units. This analysis is useful for answering questions like:

Revenue

Q. Are all business units generating sufficient revenue in these times or are some units requiring time and money to run, without adequate sales?

Expenses

Q. Which business units are spending the most on ‘Training’ (or replace this with any other expense)? By comparing spending at the divisional level, it may help to identify targeted cost control opportunities.

Operating Profit

Q. Are all units able to control costs and operate profitably? If one unit’s losses diminish the business’s profits as a whole, is it possible to temporarily freeze its operations?

Tip. If your business units have balance sheet data available, then you can further analyse your cash flow and working capital metrics:

Operating Cash Flow

Q. In a time when every cent or penny counts, are any units contributing to an outflow of cash, or an increase in the business’s burn rate? If so, is there anything that can be done about it?

Equally, you can identify which units are performing well and look to replicate successful practices across all units to improve the performance of the business overall.

Accounts Payable Days

Q. Have any units managed to secure generous payment terms with suppliers, thus helping their cash flow? If so, can other units switch to these suppliers? Or can they look to negotiate similar terms elsewhere?

Accounts Receivable Days

Q. Are some units collecting cash particularly quickly? This might be from selling to customers who pay promptly, or by implementing efficient collection processes. Can other units do the same?

Inventory Days

Q. Which units’ inventories are generating sales quickly and keeping cash flowing steadily? Can the other units stock these inventories, or implement similar stock management practices?

All these analytical possibilities help to answer questions about the profitability of your business units, and which are most at risk during a business downturn.

Variance Analysis in the Breakdown chart

Using the Breakdown analysis you can also explore which divisions are achieving budget. Tip. If required, each business unit can be imported as a separate entity, with its own associated budgets into Fathom.

Chart-2-variance-analysis

This enables you to gain granular analysis of divisional level budgets. If certain divisions are exceeding budget, then this chart will help to identify these divisions.

Log in to Fathom to analyse your individual business units and to understand how they're performing.

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