Hello,
I am building an outline business case for a shared unit (to potentially carry out soem back office processes of a council service)- would potentially be a fairly small shared unit. As part of building the outline business case I need to show what the unit could charge each of the services that wish to sign up to the shared unit would pay. I have item costs for each pilot service (including the service that would potentially host the unit) but am unsure as to how to start building a model i.e. what the recharge amount should be based on?
A catalogue of services with a recharge amount for each process/service has been requested.
Does anyone have any ideas or can anyone point me in the direction of any useful material?
Any help would be really appreciated.
Matt
Lets look at a couple of options; 1. No internal costing 2. Cost recovery 3. Profit centre 4. Outsource the function What are the strengths and weaknesses of each option? 1. No internal costing Mandate the model from senior management. Departments simplya have to use it. CEO or COO direct procurement department(s) to follow the process. build it into KPIs in the coming year or two. Strengths Weaknesses 2. Cost recovery I'll leave it to others to analyse the last 2 options, and to extend my analysis of the first two. Maybe you could put up your ideas and get some feedback? Only charge what it costs to supply the service. Simple maths is numebr of jobs/number of staff needed (based on above principle) Strengths True costs are reflected Internal departments probably shouldn't be making profit on other departments at the cost of the end customer You'll learn whether you can service this fuction efficiently or whether you should outsource ptretty quickly (if anybody pays attention after the project closes) Weaknesses Potential to understaff the team and cause bottlenecks or low service levels - people will turn to external providers Does not comply with the original stated goal of an internal charing model Need to work out how to budget for the new team (tip: aggregage all the distributed costs and call that year 1, then observe and correct.) "The boss says so" often works No additional accounting and budgeting processes to be developed Can be implemented quickly
Lets look at a couple of options;
1. No internal costing
2. Cost recovery
3. Profit centre
4. Outsource the function
What are the strengths and weaknesses of each option?
Mandate the model from senior management. Departments simplya have to use it. CEO or COO direct procurement department(s) to follow the process. build it into KPIs in the coming year or two.
Strengths
Weaknesses
I'll leave it to others to analyse the last 2 options, and to extend my analysis of the first two. Maybe you could put up your ideas and get some feedback?
Only charge what it costs to supply the service. Simple maths is numebr of jobs/number of staff needed (based on above principle)
True costs are reflected
Internal departments probably shouldn't be making profit on other departments at the cost of the end customer
You'll learn whether you can service this fuction efficiently or whether you should outsource ptretty quickly (if anybody pays attention after the project closes)
Potential to understaff the team and cause bottlenecks or low service levels - people will turn to external providers
Does not comply with the original stated goal of an internal charing model
Need to work out how to budget for the new team (tip: aggregage all the distributed costs and call that year 1, then observe and correct.)
"The boss says so" often works
No additional accounting and budgeting processes to be developed
Can be implemented quickly
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