ABC Costing Benefits

Accurate costing of products and services generates information for profitability analysis, cost reduction and process improvement. Some of the benefits are as follows: 

  1. Determine actual costs of products, services, activities, processes, products, customers, sales regions, channels.
  2. To know the profitability generated by each product, service or client.
  3. Identify which products are profitable and which generate losses.
  4. Identify customers that add value to organization and those who destroy it.
  5. Assign and allocate resources properly by business segment based on its performance.
  6. Determine profitable product portfolio by channel, region or customer in order to maximize retuns.
  7. Establish a pricing strategy based on costs and performance of products in the market.
  8. Allocate corporate resources and back office expeneses to all business units or areas, based on the actual consumption of organizations resources (shared services center).
  9. Determine cost-to-serve and elements of service to provide each client based on actual profitability
  10. Establish of Budgeting and Planning based on “operation level” instead of an “accounting” approach.

Implement a profitability and cost management system in your organization to:

  • Capture cost reduction opportunities
  • Increase profits
  • Improve processes
  • Make better decisions for your business

An ABC Costs and Profitability System should be implemented considering the objectives of the organization.