For all months, there's $2M-$3M in my Business Unit Object. All of it is coming from Service Allocations Indirect. The Service Allocations Direct (object in the model) has ZERO Costs. This would mean that the business doesn't have services that could directly be linked to a BU. Could that be possible normally? What is its significance? Could this be good or bad for business? Is there an ideal case here? Shouldn't SA Direct costs be high and SA Indirect costs be less ideally?

Hi @Jaison Joy,

It depends on your cost model. What is the definition of the Indirect/Direct allocations?

Shannon

I didn't create the model, so I'm not fully aware. But as I observe, SA Direct is more like a one-to-one mapping of services to BUs based on a data reference, and SA Indirect is a cost allocation spread on the basis of employee headcount in each BU.

So what I am hearing and please correct me if I'm wrong, is that the indirect costs are shared costs across the organization? If that is true, then there is nothing wrong with that. It sounds like a data maturity exercise. We are creating a Good, Better, Best model for our data points. We are working to identify and roadmap a maturity plan for each major point of cost. If you can pinpoint and improve them individually then you will be able to move things out of indirect and into direct in the long run. 

I hope that is helpful @Jaison Joy

Sincerely,

Shannon

Thanks @Shannon Lynch ! Yeah I understood that. In the long run as data matures we could move costs from Indirect to Direct. There's nothing wrong with the current model at the moment.

Our indirect costs to the BUs are about 20% of the total. They include things that are difficult to map to BU products (=business services with DA) and thus we allocate them as indirect based on the DA weight of each BU.

When we implemented CT that's how corporate finance had been reporting for decades, so it was hard to change.

Indirect costs ALWAYS raise questions from the BUs.