Is Activity-Based Costing Worth the Time and Effort?

Cost accountants know that traditional costing can skew their measures of product production costs. Thus, many firms turn instead to Activity-Based Costing.

Is Activity-Based Costing Worth The time and-effort

Companies that produce what they sell know well they must understand product costs accurately and in detail. This kind of information is essential for planning operations, pricing, and evaluating business margins. For product cost data, management relies on the firm’s cost accountants. But how, precisely, do the accountants develop this information?

Why Adopt Activity-Based Costing?

The Income statement gross margin is in fact an average for all products (or entire product lines). The real gross profits and gross  margins for each product can tell a very different story: A high overall GM, for instance, can obscure the reality that the firm actually takes a loss on particular products. The problem is that traditional product costing methods do not always show particular product costs accurately.

Managers turn from traditional costing to activity-based costing driven by a keen want to improve costing accuracy—get closer to the true cost and true profitability—of individual products and services. They are also moved by a wish to understand better the true costs and ROI from projects or other initiatives.

Companies Try ABC When they Need Accuracy

Companies try out ABC in their own environments to find out how well the method:

  • Identifies products that are truly unprofitable.
  • Finds the true costs of products to support pricing policy.
  • Reveals truly unnecessary costs for elimination.

Continue reading “Is Activity-Based Costing Worth the Time and Effort?”

Annual Report Insider’s Guide: What Are They Telling Me?

The Modern Annual Report to Shareholders does not look like a dreary financial report. Instead, it looks more like a glossy marketing brochure. In fact, annual reports do have a marketing purpose.

De-Clawing the Cat your business case critic.

Yes, the mandatory financials, notes, and auditor’s opinion are all there. These are usually in black and white and small print.  But the “financials ” have to sandwich in between many glossy pages with striking images, creative typography, colorful graphs, and artful prose from the Board, CEO and other officers

In response to the non-mandatory gloss, report readers naturally ask: “What are they trying to tell me?” Or, more to the point, “What are they trying to sell me?” And, “Do I buy it?” Continue reading “Annual Report Insider’s Guide: What Are They Telling Me?”

Your Business Case Critic: De-Clawing the Cat

If you don’t want nasty surprises from the hostile business case critic at your own case review then don’t surprise your audience!

Prepare for the Worst—Your Business Case Critic!

De-Clawing the Cat your business case critic.

There are some things you just do not want to hear at your business case review. You are trying, after all, to build confidence that supporting your proposal is a wise business decision. At your case review, however, certain remarks from the business-case critics can dismantle that confidence—if you are not ready for them. One hard-hitting question from a devious skeptic can undermine the credibility you work so hard to build—unless you know in advance how to turn it to your advantage. Continue reading “Your Business Case Critic: De-Clawing the Cat”

Your Business Case Credibility: Bring on the Second Team

Reference Group “Second Team” is Critical For Building-In Business-Case Credibility

Build in business case credibility with a second team

Create a Reference Group ‘Second team’ to build in Business Case  credibility.

Be ready! Start your case building project with a Reference Group!

The moment it is clear that decisions or plans call for a business case, an insidious, deadly temptation begins to operate on the project manager, product manager, consultant, or salesperson responsible for delivering the business case. Even CFOs are not immune. The tempter sends this pernicious message:

“Do it Yourself!”

The temptation has a seductive logic. If you build the business case yourself, you can be sure to end up with the right results. If you bring in outsiders, there’s no telling what you might develop. And, it isn’t easy to get the time and contributions of people outside your organization. After all, whats in it for them? “It’s better,” the tempter says, “to do it yourself.”

Take the Unnatural Response

That logic is the natural first response of most people facing the need to produce a business case. In our business case seminars and publications, we strongly urge case builders to take the “unnatural” response: recruit and use a group of people outside their immediate organizations to help design, build, and review the business case.

Continue reading “Your Business Case Credibility: Bring on the Second Team”

Government is Not Business! What Then Is a Government Business Case?

How can government business case builders prove that proposed actions will deliver tangible, measurable business value?

Professionals in Government who must produce a cost/benefit analysis, or business case, come face to face with a special challenge. And that challenge is completely unknown to their counterparts in private industry.
They ask questions like these: How do you . . .

  • Write a business case if you are not in business?
  • Find financial benefits for a government organization besides cost savings?
  • Use financial metrics such as NPV, IRR, or ROI when you don’t have financial benefits?

They ask: 

  • Can you build a business case if you are not in business?
  • Are there financial benefits in the government or non-profit case besides cost savings?
  • Do standard financial metrics such as NPV, IRR, or ROI have meaning in the not-for-profit world?

The Government Case Builder’s Dilemma

Those who ask such questions have figured out the underlying dilemma:

  • On one hand, more and more government spending decisions must be justified and documented with business case analysis. Government organizations face a steady stream of new laws, directives, and guidelines requiring responsible decision making and business case accountability.
  • On the other hand, government organizations are not in business to grow sales, increase earnings or build owners equity. Those are the primary sources of business case benefits for profit-making companies. They are not possible as business case benefits for the government organization trying to justify funding proposals, projects, or initiatives.Government organizations are expected to deliver services, not profits. But where is the business value—especially the financial value—of delivering services?

Funding requests and project proposals from government groups often do aim for cost savings. A country’s Navy, for instance, might want to fund a project that aims for lowering the daily operating cost for ships at sea. More often, however, the government request or proposal has objectives such as “Improved Response Times of Emergency Medical Services,” or “Increased readiness of a military unit.” They define success criteria for such objectives in terms of non financial key performance indicators, and financial benefits are nowhere in sight.

When cost savings and other financial benefits are nowhere in sight, however, government case builders ask: Is there still a business case for going forward?  For the case builder limited to procedural-based business case methodologies, the answer is only “Maybe.” For the case builder in command of principle-driven case-building knowledge, the answer is a  firm “Yes.

Continue reading “Government is Not Business! What Then Is a Government Business Case?”

The Principle-Driven Business Case: Maximizing Project Performance

Some project managers see the business case simply as a tool for securing project authorization and funding. A well-written business case has substantial additional value that experienced project managers have, including the knowledge of how to exploit throughout the project lifecycle.

A principle is a fundamental truth or proposition that serves as the foundation for a system of belief or behavior or for a chain of reasoning.

Very few business cases built today qualify as principle driven cases. A principle driven case manifests in short, concise documents that don’t need exhaustive descriptions to take into account every eventuality. Case building with a principle driven approach is efficient,  and case usage is clear and straightforward. And, principle driven cases have proven uniquely effective in improving project performance and delivering business value for the organization.

Continue reading “The Principle-Driven Business Case: Maximizing Project Performance”

The Master Case Builder Shop

Master Case Builder Shop

Premier Business Case Books & Resources by Solution Matrix


Business Case Essentials

The Most Frequently Cited Business Case Authority
Business Case Essentials Ebook

by Marty Schmidt
ISBN 978­1929500031
 5th Ed 2016
Published by Solution Matrix Ltd
PDF ebook 110 pages  US$ 29

Add PDF ebook to shopping cart

 

The concise, complete introduction to business case content and structure.

Essentials is written for those who must learn case building quickly—those who must deliver a compelling professional quality case in the shortest possible time.

Essentials is a complete, concise guide to what belongs in your case and why. First published as a white paper in 1998 and expanded regularly since then, Business Case Essentials is now the most frequently cited business case authority in print.

More information on Business Case Essentials…

PDF ebook 110 pages. Download today!   US$ 29
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Continue reading “The Master Case Builder Shop”

London Business Case Building Seminar. Join Us at Trafalgar Square!

New York City Business Case Seminar

When:
Next offering with availability:
Wednesday-Friday 12 – 14 September 2018

Where:
Hilton Trafalgar Square, 2 Spring Gardens, London
Places available as of today!

Seminars also in New York & Washington DC

The Business Case is No Longer Optional

Business people today are rapidly losing tolerance for management error. They are also demanding real accountability for decisions and plans. And, everywhere, the competition for scarce funds is increasing.

It is no surprise that many organizations now require a business case to support proposals for projects, products, investments, and capital acquisitions.

As a result, those with proven expertise in case building and risk management are rare and in high demand. They have a strong advantage over their professional colleagues in project management, product management, asset management, finance, strategic planning, corporate governance—and the job search.
Continue reading “London Business Case Building Seminar. Join Us at Trafalgar Square!”

Washington DC Business Case Seminar. Join Us at the US Capitol

New York City Business Case Seminar

When:
Next offering with availability:
Wednesday-Friday, 19-21 September 2018

Where:
Hilton Springfield 6550 Loisdale Rd Springfield VA
Places still available as of today!

Seminars also in London & New York City

The Business Case is No Longer Optional

Business people today are rapidly losing tolerance for management error. They are also demanding real accountability for decisions and plans. And, everywhere, the competition for scarce funds is increasing.

It is no surprise that many organizations now require a business case to support proposals for projects, products, investments, and capital acquisitions.

As a result, those with proven expertise in case building and risk management are rare and in high demand. They have a strong advantage over their professional colleagues in project management, product management, asset management, finance, strategic planning, corporate governance—and the job search. Continue reading “Washington DC Business Case Seminar. Join Us at the US Capitol”

New York City Business Case Seminar. Join Us at Times Square!

New York City Business Case Seminar

New York Business Case Master Class Seminar: Join Us at Times Square!

When:
Next offering with availability:
Wednesday-Friday 26-28 September 2018

Where:
Hilton Times Sq 234 W 42 St New York NY
Places still available as of today!

Seminars also in London & Washington DC

The Business Case is No Longer Optional

Business people today are rapidly losing tolerance for management error. They are also demanding real accountability for decisions and plans. And, everywhere, the competition for scarce funds is increasing.

It is no surprise that many organizations now require a business case to support proposals for projects, products, investments, and capital acquisitions.

As a result, those with proven expertise in case building and risk management are rare and in high demand. They have a strong advantage over their professional colleagues in project management, product management, asset management, finance, strategic planning, corporate governance—and the job search. Continue reading “New York City Business Case Seminar. Join Us at Times Square!”