Non-tech MNEs oftentimes struggle with data fragmentation; there are multiple data sources that perhaps are not aligned or rely on a different set of logic that is not documented. What I have often seen is that a key person of a project sets up an infrastructure and data processing pipelines, and later on they leave. The know-how leaves with them. Naturally, some documentation is available but it fails to convey the detailed implementation, which often is vital to understand the process fully.

Taxflow is a bridge allowing to connect scattered data, clean it, and segment it. This is a tremendous advantage for a business because of time savings and reliablity. Imagine that you have to segment 20 companies manually and display analtyics. This is the primary benefit this project brings to the businses.

Segmentation Logic

Taxflow has a separte pipeline to process a service- and product-based business. The two follow a different set of rules to segment unassigned line items. To exemplify this better, allow me to walk you through the product business.

Product-business Segmentation Logic

The group P&L consists of both entreprenuerial and routine entities. The former naturally bear more risk as they often have a higher potential for growth and innovation because they may manufacture the goods; value-added acitvities happens here. The latter, on the other hand, are more stable and predictable, but may have lower growth potential. This is because they merely act as distributors or trading hubs that push the product either to a customer or other routine (related) entities.

Let us define what actually falls under the entrepreneurial and routine activities. Entrepreneurial activities engage in high-value-adding activities inter alia own manufacturing or own R&D services. Routine activities engage in low-value-adding activities inter alia own distribution, marketing services, or contract manufacturing.

An entity might be a combination of the two activities. This is where Taxflow shines. Segmenting single-economic-activity entities is simple; just put whatever you have in a relevant segment. Mixed entities require much more attention. The following is applicable to segment Sales, Administrative, and Research & Development (R&D) costs.

Sales & Marketing

Sales & Marketing overheads are attributed to entrepreneurial and distribution segments. Contract manufacturing services cannot receive any allocation as this activity does not engage in marketing. We must come up with an appropriate allocation key; Net Sales is a decent metric to allocte those costs as revenue is an accurate proxy of a segment effort in this case. The better the performance of marketing gets, the more revenue one can expect.

Administrative Costs

Administrative costs are present across the entities, and because of that the segmentation becomes easy. Net sales are again an appropriate metric as we can justify the allocation by the amount of business done. The more business one does, the more administrative costs one incurs.

Research & Development Costs

Research & Development costs are attributed to entrepreneurial segments only. Both contract manufacturing and distribution services cannot receive any allocation as these do not engage in R&D. The allocation is rather trivial; move all costs to the entity’s own R&D segment.

The Challenge

The segmention logic outlined above is rather easy to digest and much more complex to implement; we want to have as much tracability as possible. The logic sets out a high-level segmentation, and thus is rather basic. Taxflow handles the above on the same level of detail as that of the original data. This allows for deep dives on, for instance, a profit center level.