Lists for Leaders: List 11 - Keys to Equitable Cost Allocation

Six Keys to Equitable Cost Allocation

… for Business Operations

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Lists for Leaders: List 11

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Lists for Leaders Series on SlideShare

Intro i Leadership Principles Intro ii Pillars of Business Operations List 1: Strategic Planning in Five Steps List 2: Service Quality Promises List 3: Secrets to Successful Hiring List 4: Cheap Training Ideas List 5: Performance Management Style Points List 6: Tips for a Successful Employee Survey List 7: Motivations for Managing Metrics List 8: Signs of Continuous Improvement List 9: Project Delivery Scorecard List 10: Rules for a Winning Budget Season List 11: Keys to Equitable Cost Allocation List 12: Vendor Selection Checklist List 13: Internal Control Wellness List 14: ABCs of Business Continuity Bonus! Little Lessons in Leadership

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Statement of Purpose

Equitable Cost Allocation Ensure that your operating costs are competitive when

compared to other best providers.


Contents

The 6 Keys to Equitable Cost Allocation

… in Business Operations


1. Logical 2. Reasonable 3. Explainable 4. Consistently applied 5. Updated periodically 6. Minimally flexible

But first … Cost Allocation 101

Every dime spent by your company represents a cost of doing business. The net profitability calculation for each business unit takes the cost of doing business into account.

Some cost can be attributed directly to the business unit. Easy.

Other cost – including the cost of business operations – is

support-related or administrative. These costs are shared by many business units.


More … Cost Allocation 101

Cost Allocation is the equitable distribution of shared cost across your company’s business units. Each business unit pays its fair share, based on usage.

Sample usage metrics: transaction volume, number of customers, numbers of assets serviced, volume of inventory, etc.


Finally … Cost Allocation 101

There are several methods for allocating the cost of business operations, ranging from simple to complex.

All methods have – or should have – the following key characteristics in common.


Key #1: Your cost allocation method must be ….

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Logical

Make sure your method is well-structured and predictable.

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Reasonable

Show an understanding of the business you support. Think about cost the way your business partners do.




Explainable

Provide your business partners with a clear and compelling justification for your cost allocation process. Stay out of the

weeds, though.




Consistently Applied

Your allocation must be perceived as fair. Make it formula-driven where possible.




Updated Periodically

At budget time, you will need the ability to encode new usage estimates for the coming year.




Minimally Flexible

Ideally, your cost allocation model can be easily adapted to changing business conditions (e.g. expansion, new

products, new technology, new vendor contracts, etc.).


Never underestimate … … the importance of cost management and equitable

cost allocation to the strategic mission of your company.



Key decisions depend on it … … like entering new businesses, expanding existing business and/or exiting other businesses altogether.



This is your opportunity … … to have a positive impact on your company’s

bottom line.



Seize the day.



Intro i Leadership Principles Intro ii Pillars of Business Operations List 1: Strategic Planning in Five Steps List 2: Service Quality Promises List 3: Secrets to Successful Hiring List 4: Cheap Training Ideas List 5: Performance Management Style Points List 6: Tips for a Successful Employee Survey List 7: Motivations for Managing Metrics List 8: Signs of Continuous Improvement List 9: Project Delivery Scorecard List 10: Rules for a Winning Budget Season List 11: Keys to Equitable Cost Allocation List 12: Vendor Selection Checklist List 13: Internal Control Wellness List 14: ABCs of Business Continuity Bonus! Little Lessons in Leadership

More Lists for Leaders on SlideShare

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http://www.slideshare.net/LeaderShop/intro-i-leadership-principles

http://www.slideshare.net/LeaderShop/lists-for-leaders-intro-ii

http://www.slideshare.net/LeaderShop/lists-for-leaders-list-1-strategic-planning-in-five-steps

http://www.slideshare.net/LeaderShop/lisis-for-leaders-list-2-service-quality-promises

http://www.slideshare.net/LeaderShop/lists-for-leaders-list-3-successful-hiring

http://www.slideshare.net/LeaderShop/lists-for-leaders-list-4-cheap-training-ideas

http://www.slideshare.net/LeaderShop/lists-for-leaders-list-5-performance-management-style-points

http://www.slideshare.net/LeaderShop/lists-for-leaders-list-6-gathering-employee-feedback

http://www.slideshare.net/LeaderShop/list-7-motivations-for-managing-metrics

http://www.slideshare.net/LeaderShop/list-8-signs-of-continuous-improvement

http://www.slideshare.net/LeaderShop/lists-for-leaderslist-9-project-delivery-scorecard

http://www.slideshare.net/LeaderShop/lists-for-leaders-list-10-rules-for-a-winning-budget-season

http://www.slideshare.net/LeaderShop/lists-for-leaders-list-11-keys-to-equitable-cost-allocation

http://www.slideshare.net/LeaderShop/lists-for-leaders-list-12-vendor-selection-checklist

http://www.slideshare.net/LeaderShop/lists-for-leaderslist-13-internal-control-wellness

http://www.slideshare.net/LeaderShop/lists-list-14-ab-cs-of-business-continuity

https://www.slideshare.net/LeaderShop/lists-for-leadersbonus-little-lessons-in-leadership


Workbook CD ROM

One Stop LeaderShop® is a comprehensive, convenient and affordable manager training course. We teach managers the 5 leadership principles and 14 business practices they need to drive performance, including Practice 11: Equitable Cost Allocation.

Our course is purposely written as an independent study program (classroom optional). For more information about Equitable Cost Allocation please follow these links:

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Also available on SlideShare How to Be a Great Employee

Lesson 1: Think Strategically Lesson 2: Follow a Set of Guiding Principles Lesson 3: Be a Responsible Corporate Steward Lesson 4: Care About Customers Lesson 5: Say It With Numbers Lesson 6: Manage Yourself Lesson 7: Redefine Professional Growth

Advice for career-minded beginners!


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Also available on SlideShare Leadership for the Time of Your Life

Recent Graduate Young Professional Manager of Managers C-Suite Executive

Need solutions? … help has arrived!


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Also available on SlideShare Perfect Pairings

Some business practices are simply meant to be together!

Strategic Planning & Equitable Cost

Allocation

Performance Management & Employee Satisfaction

Service Quality & Vendor Management


http://www.slideshare.net/LeaderShop/perfect-pairings-for-managers-equitable-cost-allocation-strategic-planning



http://www.slideshare.net/LeaderShop/perfect-pairings-performance-management-employee-satisfaction

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http://www.slideshare.net/LeaderShop/perfect-pairings-for-managers-service-quality-vendor-management

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CEO’s, Managers, Job Seekers and Recent Graduates! Click to learn more about our affordable manager training program.

Author, Trainer, Operations Professional CEO, One Stop LeaderShop®

Thank you for visiting One Stop LeaderShop®

The Complete Manager Training Program

Mary E. Vogan




Lists for Leaders: List 11 - Keys to Equitable Cost Allocation

Business

Transcript of Lists for Leaders: List 11 - Keys to Equitable Cost Allocation