In a prior blog I discussed the importance of management accountants understanding the fundamentals of revenue management (RM). Too often attention to RM is in the hands of marketing and sales managers without the support and expertise of management accountants and financial analysts. That gap presents a competitive opportunity for organizations to invest in rigorous causal modeling, analytics, and systematic support of revenue drivers that can dramatically enhance value creation.
To improve the organization’s revenue management approach, management accountants need to be part of a cross-function team that starts by making an initial assessment of the organization’s current revenue, customer, and market practices. It then needs to develop a revenue management system that is appropriate for the business needs, and then implement a system tailored to the organization’s objectives and the needs of its various business functions.
The following six-step methodology can be used to develop a revenue management approach where management accounting is an effective partner with other business functions:
Step 1: Do a quick assessment of the organization’s use of the four revenue management levers.
Step 2: Review levels of revenue management details to determine current practice and understand different intensities of practice.
Step 3: Analyze the organization’s business’s strategy and business environment to find issues that can assist or hinder revenue management improvement
Step 4: Evaluate revenue and cost driver importance in the organization’s strategy, and identify gaps in current managerial and accounting attention
Step 5: Design the appropriate level of revenue management and driver attention for the organization, consistent with its strategy
Step 6: Establish a cross-functional team to implement new revenue management practices, supported by management accounting skill and tools
PACE will be publishing a monograph describing this process in more detail soon. Stay tuned!