Traditional cost systems are limited in their effectiveness for current and future business planning. These outdated approaches fail to provide useful information about the true cost of doing business, since they often use obsolete or arbitrary cost allocations. Most cost allocation systems do not support the customer or process view of an organization and do not reflect costs due to complexity, diversity or uniqueness. Instead, they were designed or built to encourage reducing variances, which too often leads to decisions being misdirected and ineffective.
Cutting costs across all business units or departments is seldom effective long term, yet managing costs is critical to business success. As a solution, Beyond EPS Advisors uses a driver-based costing approach to assign resources to activities and then activities to end consumers based on demand or use. An important aspect of driver-based costing is that it associates the causal relationship of costs to activities through the use of economic and operational drivers. This enables management to understand the actual cost of performing each activity, rather than trying to figure out the impact of allocated costs to the product or service provided.
Beyond EPS Advisors has extensive experience with leading-edge cost management tools and solutions. We analyze products, services and customer relationships, and evaluate their contribution to the bottom line. Our cost management specialists can identify opportunities for improvement throughout the value chain of an organization which can reduce or eliminate non-value-added processes. We also help evaluate various alternatives such as outsourcing and centralization of activities to reduce costs and improve competitive advantage. Extending these practices beyond the four walls of a company, our clients also learn how to improve customer and supplier profitability. By implementing a driver-based costing approach to better understand and manage costs, Beyond EPS Advisors clients have consistently demonstrated that they are able to improve their productivity and develop more cost effective operations.
Driver-Based Costing is used for:
- Determining relevant and accurate product, customer, service and distribution channel profitability
- Better resource planning and capacity management
- Supporting benchmarking efforts