The purpose of Activity Based Costing is to apply indirect costs across the business in an appropriate way so that the true cost of production or service delivery is borne by the products and services respectively. Most businesses are very complex often with wild organic growth, acquisitions, divestitures, or combinations of all three. The ABC textbooks don’t do a great job of providing a practical guide to handling businesses like this. They generally assume a very homogeneous sterile environment with consistent data structures for all the business systems.

Reality is that most business don’t meet this assumption and if they do it only lasts until the next rapid growth, acquisition, or divestiture. So, an ABC solution must model these complex businesses in a way that is scalable and transparent. While it is possible to model virtually any business, it is far more difficult to model complex businesses in way that is easily explained and understood by all stakeholders. We think it is essential that the financial models are simplified so that business models don't need to be. If the methods used to drive indirect costs throughout the organization are not easily understood and accepted, the success of the ABC program is often in jeopardy.

Tartan Solutions uses novel methods to simplify Activity Analysis models so that you don’t have to make simplifying assumptions about your business.

If you would like to learn more about how Tartan Solutions can help please contact us and we would be happy to discuss your business and potential solutions with you.