Splitting employee costs across multiple dimensions in Corporate Performance Management (CPM) software enables organizations to allocate employee expenses based on various aspects such as departments, projects, products etc. This functionality enables a more accurate and granular understanding of labor costs, thereby contributing to informed decision-making and effective financial planning.
Scenario: A rapidly expanding tech firm requires a nuanced understanding of its labor costs. The company needs to allocate employee expenses across various departments like research and development, sales, and marketing, as well as across different projects, products, etc.
Solution: The company uses CPM software that allows it to split employee costs across multiple dimensions. This way, it can accurately determine how much of the total labor cost is spent on each department, project, and product. As a result, the management can make data-driven decisions, such as where to cut down costs or where to invest more resources.
Circumstances may require that an employee's cost be allocated differently for different time frames. Some products on the market only allow a set allocation, meaning that they only allow say 50-50 between two departments, forever. This is a maintenance challenge and should be avoided, especially for employees that move throughout the company on a regular basis such as project workers. If the system allows you to select an allocation, pick start and end dates, perfect.
Also look for allocation splits. Is it just two departments? Can I instead assign someone to four projects and a department? How does that work? And how does it roll-up?
Avoid mixing this up with other expenses such as an IT cost allocation across departments. Those costs are usually distinct from individual labor costs. Make sure the methodology fits with your process.