Activity based Costing and the need for Business Process and Workflow mapping

As the CFO of a mid-size services organization, let us say you are tasked with analyzing three SBUs with varying products and services. You are also expected to provide a dashboard indicating the profitability of each operation and an advisory on pricing strategies. I had such a problem on my plate some years ago, and we followed a traditional costing approach of apportioning the common overheads to each SBU based on headcount. Activity Based Costing would have been a superior approach but there were key barriers that stood in the way. Have you experienced these in your corporate finance department?

1. ABC needs to be backed by BPD. Business Process Diagramming (BPD) is a method by which the business processes and workflows can be mapped. This helpsidentify all the activities that come together to make up the Business process in the business unit. When his is available, the accountant can apply ABC to the Business Unit.
2. Accountants lack BPD skills. The need for accountants to see themselves more as partners to business operations rather than score keepers or tabulators has been understood well by business owners and senior executives. However in reality, to expect such competency and perspective is quite daunting. Process analysts and Financial accountants have mostly been strange bedfellows.

Offshoring your corporate financial management and accounting processes to us at ThomasandAlex gives you the following stepping stone benefits towards ABC

1. Process and Workflow mapping : When we transition your processes offshore, the first step is to systematically capture in detail your existing business process and workflow. This is documented carefully and validated with your help.
2. Rigorous Documentation and maintenance: We have a monthly internal audit and review mechanism to ensure that each process document is updated with any changes through the month have been incorporated.
3. Process improvement initiatives: A bi-annual evaluation is planned for process efficiencies. However, a process improvement initiative need not wait for this review and our accountants are encouraged to keep an eye for such initiatives.
4. BPD and BPA specialists : While the accountants assigned to your processes are also the custodians of the business process documentation and maintenance, they are supported by Business process analysts and BPD specialists.

So as and when you want to press in the advantages of ABC to your business unit, you will have this team ready to help you achieve your objectives. All it takes them is to translate the above practices to all your relevant business processes and get started on ABC. If you are interested to know more about our services please do not hesitate to contact us. Please also feel free to share your perspective and experience and offer your comments.