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THE BENEFITS OF INTERNAL MARKET ECONOMICS
Shared Services Perspective
FullCost links all your costs with your products and services. It delivers both unit costs (rates), and an investment-based budget.
Investment-based budgeting means submitting a budget that costs your products and services (as well as the traditional expense codes by cost center). FullCost helps you make informed budget decisions based on the needs of the business, cut costs strategically, manage expectations, and combat the impossible "do more with less" demand.
It provides a basis for business-driven governance, chargebacks or showbacks, and benchmarking.
Specifically, FullCost delivers the following benefits:
- Match clients' expectations with available resources.
- Cut costs strategically by managing demand, not just by cutting resources (ie, not promising to "do more with less").
- Negotiate adequate budgets based on requirements to fulfill expectations, rather than arbitrary benchmarks like last year's budget.
- Align all work with clients' business strategies.
- Make client-driven governance processes meaningful with an understanding of how much is in the clients' "checkbook" and what all your products and services cost.
- Induce clients to defend your budget for their projects and services.
- Never have to judge clients' ideas in the course of setting your own priorities, which positions you as an obstacle to those you're supposed to serve.
- Set aside time and money for critical investments in innovation and infrastructure.
- Ensure that rates are fair, defensible, and comparable (apples to apples) with outsourcing.
- Set fair allocations based on consumption.
- Calculates product-line profitability with a comprehensive view of costs, including fair share of all indirect costs.
- Cultivates a culture of internal customer focus, entrepreneurship, frugality, and teamwork; teaches business planning and develops the next generation of enterprise leaders.
| "FullCost allowed us to deflate large buckets of general cost and appropriate the costs to those departments that were actually using the services ... initiating some substantial discussions around the value we bring to each of those business units." |
| David Caldwell
Director, Compassion International
Why budget for products and services (investment-based budgeting), not just what you plan to spend?....
Chapter on the many benefits of developing a budget with product/service costs....
Section in chapter on the transformational impacts....
Why budgeting and rate setting should be an integrated process....