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Correctly determining the costs of an organisation is essential to be able to control them.
Currently, the pressure on companies is maximum. Competition in any sector and field is extraordinary, every day greater. The tension on sales prices does not stop. Production costs are continually rising, and corporate profit suffers. The times when an organisation could market its products and services with a stable margin are long gone.
One solution is to increase profitability by increasing production, but this option has limited or has partial success. It involves massive investments in technology; there are market limitations to easily and quickly absorb the increased production and require reliable financial support.
The ABC (Activity-Based Costing) model is the best possible methodology to determine the costs of activities and processes that a company develops and its direct imputation to commercialised products or services.
Once the information is available in a real and correct way, we can use it for different purposes like budgets and cost reduction.
Activity-based costing (ABC) has its origin in the procedures designed and developed in the eighties by corporations such as General Dynamics, McDonnell Douglas, Westinghouse or General Motors. Today they are fully established in companies such as Toyota, Volkswagen or Sony and throughout their supplier network.
After large companies, its application begins in small and medium-sized enterprises (SMEs). Small companies need to know the costs of their products and processes and their consumers and more prominent competitors.
Developing an ABC Activity-based Cost Analysis and Reduction system requires keeping four essential ideas in mind:
OAK develops consulting services in the field of Cost Analysis and Reduction. We base our methodology on the ABC (Activity-Based Costing) technique because we consider that it is the one that best translates the reality of an organisation to the management systems. Our objective is to provide our clients with correct information about the costs of their companies.
For that, we have structured the main lines of ABC action in the following services:
Our main contribution to companies is to build and provide superior professional services actively.
Its purpose is to know all the company’s characteristics and the products and services it generates, collecting all the information that the ABC System will need. After, we can inform the organisation about the project’s viability and the reliability of the information available.
The objective is to establish the structure of the cost flow and its graphical diagram.
In this chapter, we design and determine the protocols for data collection and the systematics for the periodic updating of the information required by the ABC model.
The objective is to design the control model for the ABC method, that is, the establishment of the information required by the Organisation’s Management for decision-making (budgets and offers to customers, interest and profitability of investments and extensions) and establishment of the presentation model. In this phase of the project, we also study the information obtained (reliability, promptness).
In this phase of the project, we review the functioning of the ABC system and perform preventive and corrective improvements that are required.
In this phase of the project, we help and advise the company’s software providers to implement the ABC model designed and validated in the organisation’s ERP.
