Blog · Board and management reporting
The complete contribution-after-cost-to-serve calculation on ten accounts small enough to check by hand: revenue and cost per account from invoice lines, gross margin, drops, returns and pick lines from the delivery log at stated rates, cost to serve, contribution and contribution rate, the revenue rank against the contribution rank, the components behind the account that drops furthest, and the identity that account margins sum to the ledger's gross margin, so a reader can reproduce every figure and then run it on their own exports.
Contribution is gross margin less what it costs to serve the account, and on ten accounts the whole calculation fits on a page. This page works it: margin from the invoice lines, cost to serve from the delivery log at stated rates, the two rankings, the components, and the identity.
| Component | Rate |
|---|---|
| Drop | $60 per delivery |
| Return | Returned value + $15 handling per return |
| Pick line | $0.80 per invoice line |
| Account | Revenue | Cost of goods | Gross margin | Margin % |
|---|---|---|---|---|
| A | $420,000 | $357,000 | $63,000 | 15.0% |
| B | $380,000 | $310,000 | $70,000 | 18.4% |
| C | $310,000 | $272,000 | $38,000 | 12.3% |
| D | $180,000 | $148,000 | $32,000 | 17.8% |
| E | $150,000 | $118,000 | $32,000 | 21.3% |
| F | $90,000 | $71,000 | $19,000 | 21.1% |
| G | $75,000 | $61,000 | $14,000 | 18.7% |
| H | $60,000 | $50,000 | $10,000 | 16.7% |
| I | $40,000 | $32,000 | $8,000 | 20.0% |
| J | $25,000 | $21,000 | $4,000 | 16.0% |
| Total | $1,730,000 | $1,440,000 | $290,000 | 16.8% |
Ledger gross margin for these accounts: $290,000. Identity holds.
| Account | Drops | Drop cost | Returns (count, value) | Return cost | Lines | Line cost | Cost to serve |
|---|---|---|---|---|---|---|---|
| A | 260 | $15,600 | 12, $9,000 | $9,180 | 3,100 | $2,480 | $27,260 |
| B | 104 | $6,240 | 4, $2,000 | $2,060 | 1,900 | $1,520 | $9,820 |
| C | 250 | $15,000 | 40, $31,000 | $31,600 | 2,800 | $2,240 | $48,840 |
| D | 52 | $3,120 | 2, $1,000 | $1,030 | 900 | $720 | $4,870 |
| E | 48 | $2,880 | 3, $1,500 | $1,545 | 700 | $560 | $4,985 |
| F | 52 | $3,120 | 1, $400 | $415 | 500 | $400 | $3,935 |
| G | 24 | $1,440 | 0 | $0 | 300 | $240 | $1,680 |
| H | 104 | $6,240 | 6, $3,000 | $3,090 | 800 | $640 | $9,970 |
| I | 12 | $720 | 0 | $0 | 200 | $160 | $880 |
| J | 24 | $1,440 | 1, $200 | $215 | 150 | $120 | $1,775 |
| Account | Revenue rank | Gross margin | Cost to serve | Contribution | Rate | Contribution rank |
|---|---|---|---|---|---|---|
| A | 1 | $63,000 | $27,260 | $35,740 | 8.5% | 2 |
| B | 2 | $70,000 | $9,820 | $60,180 | 15.8% | 1 |
| C | 3 | $38,000 | $48,840 | −$10,840 | −3.5% | 10 |
| D | 4 | $32,000 | $4,870 | $27,130 | 15.1% | 3 |
| E | 5 | $32,000 | $4,985 | $27,015 | 18.0% | 4 |
| F | 6 | $19,000 | $3,935 | $15,065 | 16.7% | 5 |
| G | 7 | $14,000 | $1,680 | $12,320 | 16.4% | 6 |
| H | 8 | $10,000 | $9,970 | $30 | 0.1% | 9 |
| I | 9 | $8,000 | $880 | $7,120 | 17.8% | 7 |
| J | 10 | $4,000 | $1,775 | $2,225 | 8.9% | 8 |
Account C, third by revenue, loses money. Account H, eighth by revenue, breaks even on twice-weekly drops and a five percent return rate.
| Component | Cost | Lever |
|---|---|---|
| 250 drops, five a week | $15,000 | Two drops a week saves $8,760 |
| 40 returns, $31,000 | $31,600 | A returns policy; the returns are a tenth of revenue |
| 2,800 lines | $2,240 | A minimum line value |
The returns are the finding, and the account manager has the number.
Revenue as the ranking. C is a top-three account.
Cost to serve averaged. Every account at $11,400; C's contribution reads $26,600 and the ranking is the revenue ranking.
Rates unstated. C's account manager disputes the $60.
Contribution floored. C reads zero and the size of the loss is lost.
The same components per account from the delivery log and credits, at the same stated rates. Covirage runs it on the invoice lines and the delivery log every quarter. The margin by account guide covers the measure, and the cost to serve by industry hub covers the components on other desks.
The company's own cost per drop, per return handled and per line picked, computed once a year from the delivery and warehouse cost base, and stated on the report. They are approximate; the ranking is stable across a wide range of them, and they are the same for every account.
Contribution can be negative, and on this page one account is. A negative contribution is a fact about the account's cost to serve, and the components say which lever changes it. It is not floored, because the size of the loss is the argument.
That the ten gross margins sum to the ledger's gross margin for these accounts, so that no line is missing its cost. A line with no cost would inflate that account's margin and break the sum.