Activity Based Management (ABM)

Activity-Based Management (ABM) helps identify and allocate costs/expenses incurred across the organization. In that it is a cost accounting tool to help apply cost analysis, projected costs and management accounting. ABM as a result enables controlling costs and thereby contributes directly to increased profitability.

The Problem

Traditional costing systems focused on allocating costs to a general overhead pool before a certain percentage was transferred on account of individual products. Such a system lacks transparency in terms of the actual cost drivers for the resources employed. For governments and public bodies this lack of transparency is a critical concern with the close watch on their activities by the media and regulatory authorities.

Inadequate and inaccurate cost data largely cripples the ability to gauge the drivers for the cost and thereby provides no qualitative data that can be used as in input to performance management. The problem is compounded by the need for this data for resource planning and cost allocation, which are pre-requisites to effective organizational planning.

2PI’s Value Differentiator

2PI has the experience and expertise in implementing ABM at organizations that have decided to move from the traditional cost system and towards a performance management oriented framework. 2PI will work with your company in implementing ABM such that it becomes an enabler to performance management tools like Scorecards, CRM and Value Chain Analysis. Our aim is to help you identify costs associated with each of your products and customers and thereby determine their profitability. Armed with real-time data on costs, various performance enhancement exercises can then be embarked to drive higher productivity.