Traditional cost management approach can no longer respond to today's business realities in terms of increasing pressure from customers to reduce costs and improve quality. ABC costing focusses mainly on overhead cost allocation and identifies all the cost drivers within the business by allocating costs to each activity triggering them.

The traditional approach was a backward looking approach which meant tracking, cost controlling, and monitoring financial control within businesses. The ABC approach is forward looking in the sense that it means projecting and enabling a cost effective environment. It enables strategic decision making. While the old method looked at symptoms of problems and functional disorder, the new approach analyses the underlying causes and reviews processes. Instead of looking at labour/machine utilisation, the ABC approach favours the Just in time (JIT) approach.

Our Approach

The main objective of ABC costing is to increase the proportion of value-adding activities as seen from the customer's point of view and thus maximising shareholders value. As such, focus is on activities (where and when an action occurs) which consume resources, in terms of people and equipment, in the process of creating value for customers. ABC helps you identify opportunities to improve your processes and measure the realised benefits of performance initiatives.

Costs are best influenced at source and the ability to identify, understand and manage the underlying activities behind those costs is a critical success factor in monitoring costs and eventually meeting both customers and shareholders expectations.

In addition, management will have a better framework that provide key, relevant and timely information that can be used for decision making at strategic and operational level. Management will be in a better position to confront with pricing policy changes, product redesign, product mix change, outsourcing or accepting small order quantities. This is the basis of Activity Based Management.

Our Services

No matter whether your organisation is in manufacturing or is service-oriented, ABC can prove beneficial. Hereunder are some areas in which we could partner together:

Determining the cost and selling price of a product and/ or service line
Process reengineering tailor made for the implementation of ABC
Implementation of ABC and ABC software

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