Unit cost calculations are important in many businesses and increasingly for Not-for-Profit organisations. It helps you understand the cost of each of your activities or products so that you can see which ones are profitable and which are problematic. It’s a vital part of being informed and knowing what parts of your business to maintain and expand. This means you can be sustainable for the long term.
For the full guide to calculating unit costs, read our Unit Costing for Dummies eBook. For those of you looking for a quick overview, follow these easy steps.
Record the Non-Financial Information
Whether you’re measuring the number of participants in an activity, the number of widgets you’ve sold or the number of hours you’ve worked, Metrics are the tool for you. Record budgets for the year and then update the actuals each month.
Pull it all together with KPIs
The next step is to create custom KPIs to combine your financial data with your Metrics. You could you the pre-set account group of Total Expenses or create your own group if you need something more specific. Then create a formula for your Unit Cost which would be something like:
[Total Expenses]/[Number of Participants]
For some more ideas on integrating KPIs into your management reports check out our article Get Creative with KPIs.
Display with a Chart to illustrate your Unit Cost Calculations
Compare actuals to budgets easily with a KPI Chart or add the unit costs to either the Budget Summary or the Spreadsheet Profit & Loss report. The latter is great for seeing trends and aberrations, showing actuals for the completed months of the year and budgets for the remainder.