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How Do I Choose the Best Activity-Based Costing Software?

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  • Written By: Alex Newth
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  • Last Modified Date: 06 September 2016
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Getting the best activity-based costing software often is an important step in monitoring and controlling business costs. A business normally has many different cost lines, and activity-based costing software should report on all these lines so you know exactly where the money is going. Costs are supposed to bring in profits, so a good feature to look for may be a revenue and cost comparison system. Costs and profit reports typically are needed for presentations and archival purposes, and a program that offers this usually is better. Most businesses have databases and, if activity-based costing information can be easily integrated into the database, then this may make it easier to control costs.

A business often has to use money for many different reasons, and each of these is known as a cost line. Some common lines include marketing, product creation, employee payroll and other operating costs. If the activity-based costing software just says you spent $1,000 U.S. Dollars (USD), then this may not be as effective as a program that says you spent $200 USD on employees, $600 USD on product creation and $200 USD on marketing. It usually is better to know exactly where the money is going, so costing software that reports on different costs lines normally is better.

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When you spend money on your business, that money is expected to grow because of sales or other profit-making strategies. To see if the costs are justifying their revenue, it normally is best for activity-based costing software to have a revenue comparison system. This will compare how much you have spent on your cost lines and show you how much revenue you made through the expenditures.

Profit and cost reports are important for a number of reasons, especially when it comes to a business spending money. This means activity-based costing software likely should come with reporting and analytics tools. Detailed reports normally are better, so costing software should be able to report on many different facets of cost and revenue.

The importance of data means your business, in 2011, most likely has a database. Consolidating business data usually makes it easier to find, retrieve and use that data. If your activity-based costing software has an easy integration feature, then less work will be needed to get the two to work together. Otherwise, you may need to make complicated manual exporting and importing functions, which may be difficult and can decrease the effectiveness of the costing software.

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anon358753
Post 4

Have you looked at ACE by the Pilbara Group? They are based in Australia despite a presence in the US. You can probably get a lot just by looking at their website.

anon347927
Post 2

I am working as a Cost Accountant in Western Australia.

I have been in a dilemma for quite a long time now because of the costing system of the company I am working in. Costing is our biggest mountain at the moment and I am tasked to "solve it".

I love the software we are using but the problem is, it breaks. By the way, it uses ABC, which I find very appropriate for the company because we produce at least 200 products.

However, because there is no one in the company except me and one of the owners who appreciate ABC, now I am pressured to change to standard and look for a new software. I am using WINCAPRI

at the moment, which is really great but it breaks when too much data is in it.

Can anyone advise me which software is probably good for a bakery operation? We are a medium sized company employing 100-plus people and producing and selling savouries, breads and cakes.

anon335032
Post 1

Software is really nothing more or less than a tool that helps answer a business question or satisfy a business need. And in the realm of activity-based costing (ABC), the software choices are limitless. There’s everything from free downloadable tools, to stand-alone ABC offerings, to SaaS ABC in the “cloud,” to high-end analytics tools that integrate ABC into a business intelligence suite. Purchase a COTS and implement it with internal resources, or hire “big name” consultants with their proprietary software tools. SAS, IBM, Oracle, and SAP all have ABC offerings, and SAS, Grant Thornton or Deloitte would be happy to assist – for a fee – in building and implementing your tool. The ABC choice is

really yours to make but, in the end, must support your strategic goals in order to be successful.

That’s the starting point when evaluating any ABC software: What is the business trying to achieve? That answer can be as varied as your business; it depends on the institution (private or public), the competitive environment, economic climate, funding availability, or any number of factors. Where is senior management leading? Where must the business be in five, seven or ten years? Are there potential cost savings opportunities? Which customers are our most profitable? And potentially just as important, which customers are our least profitable and should be terminated? What’s our optimal product price? How can we better tailor our customer offerings to maximize profits? Should we outsource an activity or bring it back in-house? Understanding these questions, and the depth of those potential answers, helps frame the software tool, its expected outputs, its ongoing data analytics, and/or operational reporting requirements.

If you are a manufacturing firm with only one or two products, ABC is a waste of your time; you already know and understand your production costs. If your firm offers multiple products with varying degrees of complexity, then a correctly implemented ABC software tool will bring clarity to your offerings and their true cost. If you need simply a one-time, outsourcing vs. insourcing decision, then a rapid-prototype implementation, perhaps even in MS Excel, should serve your needs. If you must satisfy operational managers on a day-to-day basis, then a fully-integrated ERP-based solution – SAS, IBM, Oracle, or SAP – will better address those needs. If cost really matters, then throw out the big four.

Choosing ABC software is a multi-tiered decision. It starts with strategy and ends with cost. As an ABC practitioner and former corporate controller, I’ve tried most software tools – SAS (ABC Technologies), SAP (Business Objects), ACE on Demand, homegrown tools – and each has its own separate set of merits. Which software you choose depends on the business problem you’re trying to solve. Should you wish to discuss further, please leave a comment.

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