An Energy Balance, why?
05.11.2019 | Author: Ilse Melotte
Energy Balance is the driving force behind the energy supplier’s operating model. It is a process, effected by the energy supplier’s management and personnel, designed to provide assurance of the achievement of the objectives in the following categories:
- effectiveness and efficiency of retail business operations
- reliability of the reporting of gross margin
- compliance with energy market applicable laws and regulations
At NrgFin we developed EB InsightsTM, an integrated guidance on risk and performance measurement that supports management by delivering actionable insights.
The objective of the EB InsightsTM methodology is to support the energy supplier in the definition of the following Management’s Assertions, which are claims made by management regarding certain aspects of a business:
- Completeness: that all data referring to business events and transactions to which the company was subjected were fully collected;
- Valuation: that all business estimates or incidents are measured at the at the most likely occurrence, amount and/or value;
- Presentation: that all transactions have been classified according the applicable standards and/or regulations;
- Efficiency: that all related processes run in a cost efficient way;
- Accuracy: that all measurements of all business events and transactions were collected and recorded without error.
EB InsightsTM introduces the concepts of:
- Customer Profitability (CP): the difference between actual revenues and costs associated with the customer relationship during a specified period. CP typically measures the past and the short-term future;
- Customer Lifetime value (CLV): a prediction of the net profit attributed to the entire future relationship with a customer. Therefore, CLV looks forward and is useful in shaping managers’ decisions when focusing on economic value creation.
Within the frame of Management Assertions, the sum of all Customers’ Profitability (CP) equals Company Profitability as determined by the Actuals Process. The sum of all Customers’ Lifetime value (CLV) equals Company Value, both important metrics to management and shareholders.