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:
- Determine actual costs of products, services, activities, processes, products, customers, sales regions, channels.
- To know the profitability generated by each product, service or client.
- Identify which products are profitable and which generate losses.
- Identify customers that add value to organization and those who destroy it.
- Assign and allocate resources properly by business segment based on its performance.
- Determine profitable product portfolio by channel, region or customer in order to maximize retuns.
- Establish a pricing strategy based on costs and performance of products in the market.
- Allocate corporate resources and back office expeneses to all business units or areas, based on the actual consumption of organizations resources (shared services center).
- Determine cost-to-serve and elements of service to provide each client based on actual profitability
- 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.