What Is Activity Based Costing?

ABC - What is it?

What is Activity Based Costing?

Part of our Back Office Software suite, it's  an approach to cost management that focuses on the relationships between processes/activities, cost drivers and resources to identify and separate value-added and non-value added activity. 

Your route to safe cost savings.

Our Flexible Reporting means you can access ALL your data...

Activity Based Costing Offers The Ability To...

ABC - Offers the ability to

  • Better manage the functional cost base for any part of the business by understanding what processes/activities are driving cost
  • Identify End-To-End cost of processes – e.g., underwriting new business
  • Safely reduce costs without destroying value
  • Support your customer service proposition with an understanding of the cost of activities
  • Understand the costs that are driven by customers.
  • Our model allows us to spread your cost centre costs:
    • Across activities in the home cost centre
    • Across all your staff
    • Into other cost centres
    • Or out of the model completely

Activity Based Costing - Activity Analysis

ABC - Activity Analysis

  • Business Process relates to the Value Chain processes. 
  • Below that, Sub-Processes relate to broad activities within the processes. 
  • Our interviews assess % of time against a third level: Activities within Sub-Processes.
  • Additional splits can be added below that level should your teams need deeper analysis.
  • Root Causes – reasons why you spend on activities – or why you spend the amount you do will be identified for each Activity to aid cost challenges.

Activity Based Costing - Challenges from the Analysis

ABC - Challenges from the Analysis

  • The precise outputs of any given analysis will be agreed with you – based upon your needs from the information. However, broad indications will be immediately apparent from the collated data.
  • We will review the analysis outputs with you to identify the top-down opportunities for realigning costs in your business. 
  • Where viable, we will compare this with anonymous data from previous clients to give you a better idea of your cost shape against – where relevant – comparable businesses.
  • Our root cause analysis – addressing the drivers behind any one activity – will identify those costs that your cost centre managers feel are impacted by positive AND negative factors. These will be selected by you. Common examples include sub-optimal processes and inadequate systems… 

Activity Based Costing - Digging Into The Activities

ABC - Digging into the Activities

  • The detailed analysis and review with you will clearly touch on the detailed activities
  • We will cover these from whichever angle is most appropriate for your business – and can look to tag them in terms that reflect your requirements. 
  • We will look to MAXIMISE spend on primary activities… 
  • We will look to OPTIMISE spend on the secondary activities that support your business… in tandem with eliminating the unnecessary, non-mandatory, non value-added activities…

Our Flexible Reporting means you can access ALL your data...

Explore our other integrated Back Office solutions...

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[MS Compliance]

Prevent Compliance breaches with timely training and testing, documentary evidence storage, diary activities and flexible analysis and exception reporting. Integrates with [MS ABC]

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