Activity-based costing falling foul of wrong IT

Businesses could be stunting the size of their activity-based costing (ABC) projects through poor software choices, a survey commissioned by business process management company Armstrong Laing Group has revealed. In today’s competitive environment, activity analysis, says the firm, is back on the corporate agenda as a means of linking costs in an organisation with work performed by people and equipment – and translating the general ledger into accurate costs, profit and performance. But some ABC software is less effective in handling the complexity of large scale projects that span entire businesses and groups. The survey, carried out by independent researcher Scantel on a sample of 83 management accountants responsible for ABC, revealed that 54 were using Armstrong Laing software, and building ABC models almost 40 times larger than those using others’ software. 41% of respondents said their project was concerned with measuring the costs and profitability of products, services, distribution channels or customers, while 39% said they were centred on costing business processes, often as part of process improvement. The results were unveiled as ALG launched its latest version of Metify Activity Based Management software, aimed at finding businesses’ most profitable customers, products, regions or channels, as well as uncovering the costs of individual business processes to drive higher profit. Richard Barrett, vice president of global marketing at ALG, commented, “Comparing user perception of how well the software performs is fraught with difficulties – the main issue being that users deploy software in different ways and interface with different systems. A research paper detailing the survey results has been published by Armstrong Laing and is available from Grace Carruthers at gcarruthers@armstronglaing.co.uk, telephone 01565 687010.