Profitability Management

How to Improve SAP Profitability Management-P2 - The Ultimate Guide

Table of Contents

SAP Profitability Management - Part 2

Here is part two of our Ultimate Guide to improving profitability management using SAP Profitability Management tools and techniques.  These have proven to be key profitability management strategies.

Profitability From Day One


Here Are The Remaining 10 Profitability Optimization Steps


  1. When reforecasting, ensure the entire reforecasting process is completed in a couple of days.

  2. Identify, measure and eliminate all non-value adding activities

    SAP PaPM provides next-generation integrated performance management applications with no set data model. It helps business enterprises to gain more flexibility and accelerate profitability. You can perform a cost analysis with minimum investment. 

  3. Your performance management system must be capable of modeling the impact and risk of possible changes in real time.

    Your business planning process also needs a feedback loop from your PaPM system.  Combined with your enterprise data warehouse, you should be able to uncover actionable insights, perform what if scenarios, and iterate to the most profitable plan.

  4. Provide all layers of management with Month-End cost and profitability reporting at an appropriate level of detail within a few days of the month end.

    Use the system to perform a detailed profitability analysis of each product or service.

  5. Provide internal clients with a detailed monthly invoice that allows them to make informed decisions about their use of IT. 

    Provide audit capabilities to the end user so that they can track both what they used and who to contact within IT to request additional information and support.

  6. Provide ongoing monitoring of the cost of key business processes and managing them down the experience curve. 

    A good practice is provided by Wal-Mart, demand yearly reductions, whether the supplier is internal or external.

    This is a key cost management best practice.

  7. Remove excess capacity and non-value adding activities in IT

    However, do not constrict it so much that there is no room for innovation.  Business users often have needs that require advanced business modeling to provide performance insights.  SAP solutions, when configured correctly, can help here.  They can also be used to eliminate redundant IT capabilities, further driving down operating costs, reducing maintenance cost and still provide better performance management solution capabilities.

  8. Use a purpose built application such as SAP Business Objects Profitability and Cost Management (PCM).

  9. Use an activity based approach to IT resource planning and budgeting - which should better able to cope with the complexity of IT than traditional budgeting.

  10. Use an activity based approach to services costing and to planning and budgeting in IT - possibly as part of adopting an ITIL approach to service management.


There you have it.  SAP Profitability and Performance Management, PaPM, is a SAP Solution that offers you very powerful profitability improvement tools.  Used within SAP's Enterprise Resource Planning (SAP ERP) environment, you can set and achieve healthy performance goals.

Have You Taken All 21 Steps to Profit Maximization?


Twenty-one concrete Profitability Management Strategies Best Practices for improving your firm's profitability, along with potential IT solutions and management practices to support it.  You can also download all of these tips in a handy presentation by clicking the button below.


How to Improve Profitability  with SAP Profitability  and Cost Management





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Lonnie D. Ayers, PMP

About the Author: Lonnie Ayers is a Hubspot Certified Inbound Marketing consultant, with additional certifications in Hubspot Content Optimization, Hubspot Contextual Marketing, and is a Hubspot Certified Partner. Specialized in demand generation and sales execution, especially in the SAP, Oracle and Microsoft Partner space, he has unique insight into the tough challenges Service Providers face with generating leads and closing sales using the latest digital tools. With 15 years of SAP Program Management experience, and dozens of complex sales engagements under his belt, he helps partners develop and communicate their unique sales proposition. Frequently sought as a public speaker in various events, he is available for both inhouse engagements and remote coaching.
Balanced Scorecard Consultant

He also recently released a book "How to Dominate Any Market - Turbocharging Your Digital Marketing and Sales Results", which is available on Amazon.

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