Customer Profitability: Include Support and Delivery Complexity

Review existing customer accounts using the work recorded against each one. It focuses on the cost of serving them; it does not calculate customer acquisition cost. Start with a completed month or quarter and compare the same period across accounts.

Trace the activities behind each account

Record orders, deliveries, support hours, returns processing and billing administration. Activity-based costing links cost to the activities that drive it. Use time logs and delivery records rather than assuming every customer consumes the same share.

First establish what is already in gross profit. If freight or service labour is included in cost of sales, do not subtract it again below. The fictional comparison treats product cost only as cost of sales, then deducts the other listed account costs separately.

Assumptions: Fictional Australian-dollar management example. Revenue and costs exclude any recoverable GST; non-recoverable tax is included in costs. No GST entitlement or income-tax deduction is assumed for your business. Contribution is before unallocated overhead and income tax. Internal hourly rates allocate staff cost for management analysis; they are not wages. Gross profit already reflects any sales refunds and product-cost adjustments. No listed cost appears twice.

Item	Customer A	Customer B
Revenue	$20,000	$12,000
Product cost of sales	−$12,000	−$7,200
Gross profit	$8,000	$4,800
Support at internal $60/hour	30 hours / −$1,800	8 hours / −$480
Delivery costs	−$900	−$200
Return handling, not product cost	−$300	−$100
Billing/admin at $60/hour	10 hours / −$600	2 hours / −$120
Contribution after account costs	$4,400	$3,900
Share of revenue remaining	22%	32.5%

Original ASBG worked example. All businesses, amounts and scenarios are fictional. The table contains the same figures as the visual.

Customer A leaves more contribution dollars, while B leaves a higher percentage and consumes less time. Neither measure alone tells you which customer is more valuable. Check payment reliability, future work, concentration risk and whether capacity is constrained.

Separate included service from extra work

Read the agreement before calling support excessive. If a customer was promised training or regular calls, those activities belong in delivery cost. If work genuinely sits outside the agreed scope, record the request, authorisation and billing outcome separately. Do not assume it can be invoiced retrospectively.

Compare the retainer workload review where monthly fees cover variable amounts of work. Keep a consistent internal hourly-cost basis, including the same categories for both customers.

Identify what could actually improve

Suppose consolidating A's deliveries saves $300 in freight and clearer request forms save ten staff hours valued at $60. The management result improves by $900 to $5,300 under that plan. But if payroll remains unchanged, the immediate cash saving is $300; the other benefit is ten released hours.

Those hours need an identified use before they become additional contribution. Use the capacity comparison if they are the scarce resource. Do not add both the $600 allocated-time saving and the full contribution of redeployed work without reconciling the labour-cost basis.

Use the review in a service conversation

Write down one proposed change, its expected cost effect, what the customer would experience, who must agree and when to review the result. Options could include a consolidated delivery day, a clearer order cut-off or a revised scope at renewal. Preserve current commitments while discussing changes.

Track actual delivery count and support time afterwards. A revised price does not fix avoidable rework, while a process improvement may preserve both the relationship and contribution.

Where to get help

Review the cost allocation with your accountant and the service arrangements with the person who manages the account. The pricing and profit guide links this review to recurring-service forecasting and product decisions.