Profitability Analytics Center of Excellence
The Profitability Analytics Center of Excellence (PACE) is a non-profit community of professionals dedicated to helping organizations make better, more informed decisions through the use of data analytics employing integrated, causal models. Focusing exclusively on how to enable better managerial decision-making within organizations through the use of such models, PACE is the go-to source for people looking for independent and impartial (vendor and methodology neutral) information in this area.
What is Profitability Analytics
The goal of Profitability Analytics is to provide managers with information based on sound economic principles (independent of external financial reporting requirements) to enhance organizational decision making. It achieves this through the development of integrated models of an organization's revenues, costs, and investments based on an operational understanding of an organization and aligned with its overall strategy.
How is Profitability Analytics Different?
Profitability Analytics Adopts an Internal Decision-Support Perspective
Profitability is most often measured based on external financial reporting requirements, such as generally accepted accounting principles, and reported on “general purpose” financial statements designed primarily for investors and lenders.
The internal decision-support perspective is very different. The primary principle that applies to the internal decision-support perspective is causality or cause and effect. The financial information created for internal decisions must clearly reflect the reality of the resources, processes, customers, and situations.
Profitability Analytics Focuses on the Analytics Key to Organizational Success
Profitability Analytics focuses on producing high-quality internal decision-support information that supports decision making throughout the organization. It focusses on the performance metrics – both financial and nonfinancial – that are key to an organization’s success and accurately measuring those metrics, free of the distortions caused by following external reporting requirements.
Profitability Analytics Integrates Organizational Strategy with Operational Planning
In many organizations strategy and related operational targets are disconnected from the financial and operational plans and underlying assumptions. Profitability analytics aligns operational planning with an organization’s strategy within a strategic management framework.
Profitability Analytics is Based on Integrated Modeling of an Organization
Many organizations employ Inaccurate, incomplete, and immature financial planning and analysis (FP&A) models and processes. This leads to an inability to accurately forecast operational results, to identify potential cost reduction opportunities, and fails to expose financial and operational risk. Additionally, static and functionally-focused budgets reinforce functional silos and promote decisions that undermine organizational performance. Profitability Analytics is built on a holistic, integrated view of revenue management, managerial costing, and investment management within an organization which overcomes these deficiencies.
PACE has developed its Profitability Analytics Framework to provide high-level guidance on developing a Profitability Analytics model.
PACE is composed of researchers, practitioners, and consultants who are building analytical models to effectively track cost and revenue drivers and performance measures.
PACE offers interactive online webinars, interest groups, and conference presentations to promote new models to better track and manage cost and revenue activities.
By joining our interactive Forum you can be part of a community of academics and practitioners sharing experiences, challenges, and best practices in the field of profitability analytics.
Become a member of PACE today!
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PACE is also available in Twitter at @pace_coe.