Computer-Implemented Profitability Optimization Process
OwnerRobert J. Shawinventor
Life of this patent
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Abstract
The present invention relates to a method for rigorous decomposition of a business entity's income statement into a multi-dimensional profitability model and a subsequent dissemination of granular profitability information to all levels of the organization. By decomposing the business's income statement into fully-loaded components and assigning employees to be accountable for each subdivision, the process enables precise profitability optimizing tactics to be originated and implemented at every level of the organization. As a benefit, the business entity typically experiences a dramatic improvements in profitability.
Claims10
A computer-implemented method for improving profitability of a business entity, comprising the steps of:
- (A) selecting an income statement of a business entity for a specific period of time, having numerical values for at least the following measures:
- total revenue, costs of goods (or services) sold, gross profit, operating expenses and net operating income, all of which shall have meanings defined under Generally Accepted Accounting Principles (GAAP);
- (B) decomposing said income statement into two or more (and often thousands) transaction-specific sub-components, each having the same minimum measures as the original income statement and, when summed, equaling the original income statement, where each sub-component represents a specific line item on a specific invoice during said period of time;
- (C) associating said transaction-specific components with one or more hierarchical dimensions, wherein said all hierarchical dimensions have more than one node of hierarchy, and then aggregating transactions along said hierarchies, to produce a hierarchical series of specialized income statements of said at least one accountable unit and/or profitability measure for said more than one node along said all hierarchical dimensions, wherein the sum of said hierarchical series of specialized income statement of said at least one accountable unit and/or profitability measure along said all hierarchical dimensions is equal to said numerical value of said accountable unit and/or profitability measure in said overall income statement;
- (D) identifying at least one node of said all hierarchical dimensions for subsequent structural change;
- (E) making structural change to said at least one node of said all hierarchical dimensions identified in step (D), wherein said computer implemented method predicts an improvement in the profit or decrease in loss for said node of said all hierarchical dimensions identified in step (D);
- (F) comparing the prediction in step (E) to actual improvement in the profit or decrease in the loss for said at least one node of said all hierarchical dimensions identified in step (D);
- and
- (G) optionally, applying information from step (F) and repeating steps (A) through (G), periodically.
Dependencies are inferred from the claim text.