Case Study – Management reporting 

Multi-Service Business 

The Problem 

This business was preparing a basic package of quarterly financial reports to review at their directors meetings. The Profit & Loss Statement was a consolidated report which gave only the bottom line performance as a feedback measure. Any issues were concealed in the figures and the report didn't provide any useful information on how each part of the business was performing.  

The Action 

We modified the chart of accounts to split income and direct costs for each business unit into separate accounts and provide financial results for each of the business units that could be evaluated. Over time, this uncovered that the business was losing money on its freight operations and this was being subsidised by profit margins on its product sales. 

This prompted a look at the way freight was quoted, and calculating the cost of running the different trucks in their fleet, and the costs of going to different geographic locations.  

This analysis uncovered the following problems:- 

• Sales staff were quoting freight without considering if residual truck space could be filled with other orders, resulting in losses on those deliveries. 

• Trips to remote or difficult locations were not being charged at high enough rates to cover costs. 

• Extra trips to site to deliver missing parts were becoming more common. 

The Results 

As a result of modifying the way information is presented, this company was able to turn its freight operation into a profitable business unit by implementing the following actions:- 

• Educating sales staff on factors to consider when quoting freight. 

• Charging higher rates for trips to remote or difficult locations. 

• More focus on checking off loads before they left the depot.