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Learn what ABC
is and the concepts it applies.
What it does: Gives management information to manage. The
accountants have finally listened to managers and have responded with
something good managers have known for years.
The information from the ABC system can be used for many things such as determining a competitive price for a product, developing budgets, future cost estimating and measuring performance. But ABC is much more than a superior accounting system. It allows management to understand what triggers costs and how to manage them. Unlike traditional accounting systems, ABC is a cost management system that provides a matrix to accurately quantify consumed resources triggered by activities and activities triggered by products and processes. A company thus has clear insight into the efficiency with which it converts resources into value.
Having costs broken out to a detailed level allows cost drivers to stand out. This visibility enables a company to identify activities with disproportionately large cost and little value added so these activities can be eliminated or reduced. ABC can help employees make cost conscious decisions at all levels of the company and promotes proactive cost reduction rather than reactive performance problem investigation. When ABC is used as a management system, it is a powerful tool for rethinking and improving products, services, processes and market strategies. For example, when overhead costs are allocated directly to products, managers often find that a particular product is not profitable which may lead to a change in business strategy. ABC provides the means to allow a company to decide if resource consumption for a particular product is consistent with its business objectives.
Why it works:
Reserved
Law (commentary and citation)
Regs (commentary and citation)
Cases (commentary and citation)
The most basic approach is to use ABC in conjunction with a company's current accounting system. In this case, software can be bought to help structure the tiering down from the traditional accounting system to a detailed activity based accounting configuration. The traditional accounting system is still used and the ABC structure is an add-on or shadow system to be use when specific information is needed for a decision. An off line system can allow an organization to improve their cost information without disrupting their current information and financial systems. This is recommended for small firms or as a first step towards full ABC integration for a larger firm.
At the other end of the spectrum, ABC is used in place of the traditional accounting system. Every cost related facet of the accounting system would be reported to the ABC structure. In order to institute major organizational change, all employees must fully incorporate ABC into their work practices and use it as their primary source of business information. Cost and performance measurement systems and all incentive systems have to be tied to the ABC numbers. The advantage of using ABC as the sole accounting system is that it will be used consistently for daily decision making and employees will not retreat back to their old practices. A traditional accounting system usually cannot report costs by processes because the purpose is to help the accounting department keep the books. The purpose of ABC is to help operations do their job by making cost information available at a level that everyone can use for day to day decision making.
The biggest obstacle to incorporating ABC as a way of life is employee resistance. Unit managers may be afraid ABC is just a way for upper management to discover detailed information about a department or to reveal inefficient practices that had previously been hidden by the traditional accounting system. The corporate culture must be such that new information is not used against a business unit. Instead, everyone should be encouraged to dig up problems and inefficiencies so those practices can be changed and decisions can be made that will benefit the whole company. Everyone must understand and agree that a cost-conscious approach is the company's priority and ABC is the tool to make that possible.
This is about Activity Based Taxplanning - maximizing deductions,
minimizing cash outlay and maximizing the amount of cash retained and the net worth.
Activity Based Taxplanning (ABT) is a methodology developed by Bob Parrish CPA,
that assists people with the tax issues by focusing on the activity (or actions
- events) that are being undertaken or contemplated (or have already taken
place). The, research is compiled from the myriad of sources to help
you complete the activity with the least tax cost, while maintaining compliance
the the tax laws, other laws and regulations and place yourself in a position to
protect your objectives.
Tax is a subject that many view in order to cut costs. Taxes are a cost just as any other cost. It happens this cost is somewhat intangible and is defined by legislation without a tangible item to view and control. The money is spent and the control of the expenditure is more appropriately administered by someone trained in the law.
This is about Activity Based Costing - methods to cut costs,
management accounting, management information systems, decision support systems - in
general about being a manager.
More information will be added later - this is a summary and therefore will not include details on the cost cutting methods. The ABC in itself is a methodology to assist the manager to cut costs.
Entrance Interview
Organizer to be added for gathering department information, services, production, and support activities. Activities must be identified and then the actions and costs of the activities must be recorded.
Exit Interview
From Banking Records
From Customer Records
From Signed Documents
From Your Other Business, or Financial Records
From Corporation or Organization Records (meetings, etc.)
What to do
Assistance
- What to do:
Another important step to implementing ABC and getting buy-in at all levels is extensive training. All employees must be educated in the principles and mechanics of ABC. Depending on the level of involvement, employees may be trained in the basic concepts of ABC, problem solving, information analysis or how to build a new ABC system.
Implementation of ABC can take anywhere from 3 to 15 months depending on the size of the company or plant. After the new system is in place, the old accounting system should be dumped as soon as possible if ABC is to be used exclusively.
The process for setting up a new ABC system is not simple and goes beyond the scope of this paper. A matrix must be established for each product that tracks all activities performed for the product and all the resources the activities consume. This information is probably not readily available and must be dug up. This can be done through searching existing documentation and historical cost information, workshops, surveys and interviews with the people who do the work. Many statistical measurements must be developed to spread overhead costs to products and processes. Larger companies usually hire a professional in ABC to help get the system up and running correctly.
Forms - Checklists - Etc.
Spreadsheet #1
Agreement #1
Report #1
Checklist #1
Checklist #1
Financial
Statement Presentation: this section will in the future make some
suggestions in order to communicate the concepts. This topic
(ABC) DOES NOT IMPACT THE "FINANCIAL REPORTING".
IT DOES AFFECT THE MANAGEMENT REPORTING.
Notes to Financial Statements
How to Make Entries
What Kind of Records to Keep
Bookkeeping Methods - Cash, Accrual and Other
How the Business Entity Affects the Recording
 |
Sole Proprietor |
|
Corporation - C & S |
|
Partnerships - General, Limited, Limited Liability Company, Registered Limited Liability Partnership or Company |
|
Trusts |
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Tax Exempt |
Compliance Checklist
Action Checklist
Alerts
& Dangers - Risks
Asset Protection
Your Defense
