Premier Rock & PlantMech
Willawong, Queensland Australia
Premier Rock Machinery selects only the very best manufacturing brands from companies that design and build world-class excavator attachments to the most exacting standards using high quality materials suitable for the rugged Australian environment.
With a state-of-the-art workshop facilities and a fleet of dedicated service vehicles, Premier Rock Machinery is able to assist customers on or off their site whether they are engaged in the smallest of earthwork projects or the most demanding construction and civil engineering challenges.
PlantMech is the founding company of Premier Rock Machinery. PlantMech was established in 2002 to provide an installation and design service for auxiliary hydraulic systems mainly on new earthmoving equipment.
Premier Rock Machinery is the preferred supplier of world class excavator attachments and safety systems to the construction, demolition, road, recycling, mining, rail, pipeline and quarry industries.
Based in Brisbane, PRM are the Australian agents for Lehnhoff, Montabert, MOVAX, Rotar, GKD Technik and Remu.
SensorZone from GKD
GKD’s SensorZone proximity warning system creates safe working zones using high frequency beams to alert both the human and mechanical workforce when they are at risk.
PRM is well known for providing outstanding after sales service, spares and support across our range of world class attachments and safety systems.
The PRM range includes Montabert Drills & Rock Breakers, Remu Screening and Padding Buckets, Movax Pile Drivers, Piling Drills & Piling Hammers, Rotar Demolition Attachments, Lehnhoff Automatic Quick Couplers and Safety Systems including Height, Slew, Load & Proximity Warning Systems.
PlantMech supplies hydraulic services and installation capabilities to PRM. PlantMech has developed into a complete hydraulic installation sales and service company with a focus on serving the earthmoving, construction, forestry and demolition-machinery markets in Queensland.
Together with a large inventory of hoses, fittings, valves, controls, and special adapters, as well as tube-making and fabrication capabilities, plus electronic and electrical system install service complemented by our in-house CAD bureau service PlantMech can provide a level of service that is hard to match.
PRM – PlantMech Invited to present at Downer’s National Road Show
Partnering with ABC Business Solutions – Ostendo and Xero
Premier Rock and PlantMech had an accounting system, but no inventory or job management system. There was no visibility of cashflow, or inventory wastage. Even purchase orders were done on paper. Avril Davis, one of the owners of both companies, said that without an integrated system, and visibility of the businesses high value stock items, the business didn’t have ‘sustainability to grow’.
Avril said they had looked at other systems, but Ostendo was the best. Plus they were attracted to ABC Business Solutions background in implementing systems from an Accounting focus, not an IT focus. Carol’s background in Cost and Management accounting, meant that the process was about Systems Improvement, not software installation. PlantMech had already spent a year on another System, but it didn’t work. Avril liked the Accountability focus with Carol and ABC Business Solutions. The system has made them look at the business, and the policies and procedures that are impacting the business growing and moving to the next level.
“Ostendo with Xero is better than we thought it would be”, says Avril. “We are managing purchases and cost much better than before. We just had a stocktake on our agency stock, and it was only down $1,200, before Ostendo, it was down $60,000. The system is paying for itself”.
Avril also said that with Creditors, there are far less surprises on what needs paying, which was very stressful previously. “Before we only had a gut feeling on job costing and staff productivity”. It was also much harder to manage costs and cash flow buying stock in EURO with three months lead time.
We are now planning to create a third company, said Avril, and will be working towards ISO registration, now that we have Ostendo.
“We can also start tendering bigger work, that we couldn’t do in the past”. Avril says that “Ostendo with Xero gives us the accountability to grow. The reports give Mike and I a clear and accurate picture on the businesses, from both the Operations and KPIs” “Carol has passion and drive, and we will continue to keep her involved on a monthly basis, as we move forward and grow. She has outside eyes looking at our businesses and systems. Both Mike and I believe we now have the correct systems and a good partnership with ABC Business Solutions to really grow and measure our growth in the future”.
Dalby, Queensland Australia
HISTORY – OUR RICH HISTORY
In the early 1950s, the Gosden family started a long and successful career in the grain industry trading as JH Gosden Pty Ltd. They were mobile seed graders.
The business proved to be popular with local growers leading to the construction of a grain processing and storage facility in the town of Dalby.
In 1974, the Jorgensen family joined the team, sharing the same vision and ethics as the Gosdens. The business was renamed Gosden Jorgensen Seeds.
Through hard work and determination, Jack Gosden and Max Jorgensen made Gosden Jorgensen Seeds one of the leading grain and seed handling businesses in the area.
In 1994, the Jorgensen’s bought a second site, Associated Grain. Located on the Warrego Highway near Dalby, the site would assist Gosden Jorgensen Seeds with additional processing, packing, grading and storage facilities to accommodate increasing demand.
In 2000, the two entities consolidated and trade today as Associated Grain.
Partnering with ABC Business Solutions – Ostendo and Moneyworks
Associated Grain had outgrown their current industry specific program. It was cumbersome, very man power intensive and had limited reporting ability. Geoff Birch (Seed Manager) knew it was restricting growth, as they were using manual processes for inventory control and customer management, mostly done in Excel. They needed an inventory system, that would allow twenty plus concurrent users, set up, for Seed traceability- which they now have.
Geoff says ABC Business Solutions were selected from a group of consulting firms that were interviewed, because “we could describe what we wanted, and ABC could isolate the problem and solve it – live – in front of us. Carol knew the systems inside out, while the others we spoke to were just salespeople”.
Ostendo provides them with integrated processes from Contract to Sale, while managing inventory at multiple locations. Geoff says Ostendo is “open and transparent, and easy for staff to use, and easy for new staff to do their job”.
“Ostendo’s customisable list views have made Managing easier”, says Geoff. “We have been able to increase turnover in Grain, nearly double in Seed, without needing to put on additional staff”.
Benita Raguse (Management Accountant), also commented that “existing staff were happier, as they were more productive, handling less problems, and not having to do as much overtime in the peak periods to get the Grain and Seed ready for delivery”.
Associated Grain have used Ostendo custom screens to have integrated Weighbridge functions, a Seed Shop web integration with Ostendo , and a Smarter Seeds web integration with Ostendo, allowing Grain to be exchanged for Seed. These custom screens are created in .net , and integrate with Ostendo’s SQL Firebird database, and allow Associated Grain to have industry specific , and business specific functions on entry screens , while creating real time actions for both web and the weighbridge .
Both Geoff and Benita stated, separately, that the Ostendo system has improved the issuing of invoices, cash flow and improved the experience for their customers and growers, as growers are now paid via RCTI and on time.
Benita worked with the previous general ledger system, as well as Moneyworks, and because Ostendo is fully integrated with Moneyworks, finds the search features and reconciliation processes in Moneyworks easy. Benita says “we have much more visibility, and BAS work and preparing for Audits is much easier”. Benita believes if they didn’t now have Ostendo and Moneyworks, with Associated Grain’s current trading conditions, they would have “double the staff”.
Geoff believes the system now functions without the need for so much hands on management and that the system is now “bigger than the importance of any one person”.
Associated Grain will continue to replace more of the stand alone systems that still exist, with ABC Business Solutions and Carol, working with the Management Team, to problem solve replacing out dated systems, with integration into Ostendo. As well as this, the opportunity to replace some manual processes in the warehouses with Ostendo mobility is on the list for 2017.
Both Geoff and Benita agree that Ostendo with Moneyworks has been an excellent fit for their industry, because ABC Business Solutions are able to understand, and provide the customising and training required, for their specific industry needs.
Tensens Cleaning Supplies
Kunda Park, Queensland Australia
Tensens supplies all types of cleaning products to the commercial industry including hospitality, carpet cleaning, schools and universities. Their products range from chemicals through to large ride-on scrubbing machines and everything in between.Company backgroundTensens is a family owned business operating on the Sunshine Coast; in February 2015 they will have been in operation 20 years.Hans Tensen started a contract carpet cleaning business in Melbourne catering to corporate clients. Hans partnered with Polyvac and eventually the family moved to Queensland to run the Queensland branch. When the Queensland branch was closed Tensens Cleaning Supplies was created, with humble beginnings, operating out of a tin shed in Caboolture.Marcia, Hans’s daughter, started working in the business at the age of 18 and continues to do so. Marcia and her husband Ben Rodgers have been managing the business since 2004 and in December 2010 took on ownership of the business. Ben and Marcia have seen the business grow by 20% every year since.Ben says “our strong growth is a result of our hard work and our ongoing strategy to seek out new business opportunities. We pride ourselves on selling top quality products”.
Partnering with ABC Business Solutions and Exo Business
The business employs 13 staff in customer service, sales, training, warehousing and delivery. With their growth, Tensens required a software solution that was capable of handling all aspects of their business and to grow with them.They had outgrown MYOB Enterprise and required customised reporting, robust tracking of back orders and detailed job costing. To meet all of their requirements the decision was made to move to Exo Business.
When Tensens started using Exo Business the implementation and setup was done prior to partnering with ABC Business Solutions. Exo Business was not meeting expectations or being utilised to its full extent. Ben researched alternative Exo partners, got testimonials from other Exo users and found ABC Business Solutions.
Ben says “ABC Business Solutions came to us with expertise in accounting, stock management, job costing, report writing and software customisation to get Exo Business working properly for us. Carol Roberts
was straight forward with timelines, what was required and how we were to accomplish this.
A lot of ABC skill has gone into reworking Exo Business to meet our needs. This was implemented by Carol and her staff having clear objectives and processes. Carol taught us to change the way we look at our business and get back to the basics to solve the problems. We now utilise more functionality in Exo Business to make the business more transparent.”
Donaugh Austin from ABC Business Solutions prepared customised reports to give the owners meaningful insight into their business operations. Scripting was done for labels and bar codes, giving them the ability to tightly control their stock.
ABC Business Solutions stands out from other consulting firms with their accounting knowledge and expertise of how the software works. Jennifer Glisson has helped us understand the accounting in Exo Business and also the payroll program. Ben commented “Carol, Donaugh and Jennifer are genuinely helpful with the running of our business. They are an honest, straight forward business which understands that businesses don’t want headaches but need to run smoothly and make a profit.”
Ben says “we have a great website that creates a lot of leads and integrates into our MYOB Exo Business software via Straightsell and gives us excellent search engine optimisation”. In addition to the workshop using job costing, all equipment that requires servicing is serial number tracked with ability to schedule and cost this servicing using the serviceable units module.
Tensens plan to continually improve on their product line, focusing on growing markets such as contract cleaners, healthcare and education. Tensens also plan to expand geographically by opening more branches.
We see ABC Business Solutions providing continued support and assisting us with our future growth plans.
Ben Rodgers, Director Tensens Cleaning Supplies
Insolvency, turnaround, advisory and forensic firm SV Partners learns about the financial health of the business at the touch of a button.
SV Partners is a national specialist accounting and advisory firm, with 13 offices in the metropolitan and regional areas of each state, across the eastern seaboard.
With so many offices spread around the country, it is essential the management team is able to keep a watchful eye over the health of the group as a whole, without getting bogged down in individual P&L and working capital.
Until recently, that wasn’t possible.
An end to end-of-month consolidation
For nearly a decade, the business had been using MYOB Premier as its accounting software.
“We liked Premier,” says chartered accountant, Director of Forensics at SV Partners, Rohan Youngman.
A guiding hand
Integral to the success of the new system was QLD-based MYOB implementation partner ABC Business Solutions, who helped to ensure the structure of accounts in EXO was tailored precisely to SV Partners’ model.
The benefit of working with a company like ABC Business Solutions – who are not just software specialists but trained accountants – is that as well as assisting with the technical implications of setting up a system like EXO, they understand the complex statutory and board reporting requirements.
“We didn’t want to develop a heap of individual EXO general ledgers and then have to worry about consolidation at year end,” says Mr Youngman. “We wanted the opposite – a single, general ledger that could give us the financial position of the group in an instant, but also shed light on geographical locations, disciplines or even directors as and when we needed more detailed visibility.”
ABC Business Solutions were able to make that happen, and also support the integrity in the procedures and protocols to ensure accurate and timely reporting.
Understanding performance measures
The detailed information relating to SV Partners’ financial health is built from the bottom up: information on a particular business unit (insolvency in QLD, for example) is fed into a state report; the state reports consolidate into a national discipline (eg insolvency in Australia). The national disciplines ultimately consolidate into the overall group.
The snapshot view, however, is from the top down. Management can get an instant picture of the balance sheet at group level, without getting bogged down in P&L or working capital at a regional or local level.
A significant improvement
Subsequent to July 2013, SV Partners have a much better feel for the performance and management of the business as a whole.
“In the past”, says Mr Youngman, “we had all the parts but we could only go about adding up the sum of the parts on a quarterly basis – usually when we had to comply with reporting deadlines to our external stakeholders.
“Now, understanding our financial perspective is a button pressing exercise – which is a significant improvement as a whole in relation to the financial management of the business.”
Rohan Youngman, Director of Forensics, SV Partners
“It was easy to use, had good functionality and it was intuitive in relation to structuring of charts and reporting.”
For SV Partners, the need to move to a new system was a consequence of the significant growth of the business that required more sophisticated and timely consolidated reporting.
“We had individual entity ledgers in Premier,” explains Mr Youngman, “so if we wanted to report at group level, we’d have to go through a lengthy consolidation process”.
In 2010, realising the only way to streamline their accounting was to implement an ERP system, SV Partners made the switch to MYOB EXO.
The move to a single general ledger
Mr Youngman admits that for the first couple of years, they were little more than babes in the woods.
“When we first switched to EXO,” he says, “we were hoping to use an overlay system called Alchemex to generate divisionalised and consolidated reporting. But that never really got off the ground.”
It was only at the start of the 2013 financial year – when all of the operational business units moved to a common group ownership – that SV Partners decided they could operate under a single general ledger system.
“It was then we really started using EXO as an ERP system, structuring the accounts in such a way that we could slice and dice them pretty much.”
The advantage of this approach is that it still allows SV Partners to benchmark its individual locations.
“We’re always looking for efficiencies that we can adopt across the board. Using EXO, we’ve got that ability to understand what those performance measures are, with a view to isolating and focusing on areas where improvements need to be made,” says Mr Youngman.
Integrity of data the number one priority
Asked how the business has acclimatised to EXO following nearly a decade with Premier, Mr Youngman is upbeat.
From a processing and reporting perspective, he says staff are now reaching a standard of comprehension where they can be more definitive and independent in their use of the system.
“We still need support when it comes to the report writing process.”
Fortunately that’s something ABC Business Solutions – with their high level expertise in creating complex clarity financial reports for multi discipline, multi level GL structures – can provide.
“But we’re not creating new reports every day,” adds Mr Youngman.
Knowing how to use EXO is only half the picture. In many respects, it’s more important that staff are disciplined and focused in the manner in which they input their information.
“Given the effort that’s gone into restructuring our chart of accounts,” says Mr Youngman, “it’s essential that we can rely on the information that comes out. We can only do that if we’re entering information in the correct way to start with. The old adage rings true: garbage in, garbage out.”
Wood Enterprises is an electrical industry Manufacturer’s agent. Begun around 40 years ago by Robert Wood, the 22-employee strong company now sells air conditioners, brown goods, white goods, features a commercial range and recently added the Queensland servicing division for sought after brand “Smeg” to their list of accomplishments.
Known in the industry for their service, integrity, client commitment and diversity – “if you don’t know where to go; call Wood” – when the business began to change and the accounting and IT systems were struggling, owner Malcolm Gray could see an update was required if they were to maintain their excellent reputation.
A combination of planned expansion and capitalising on opportunities presented saw Wood Enterprises selling an ever-growing number of brands, and an expanded range of products from within those brands. This required much more product to be warehoused – with all of the inherent movement, tracking and tracing – and with the addition of the servicing division of Smeg, and rapid growth in all areas of the business, says Samantha Wood (Administration) “our systems were simply no longer adequate”.
Partnering with ABC Business Solutions and MYOB Account Right and Ostendo
Wood Enterprises knew they were unhappy with their current systems – they were inflexible, not user friendly and the reporting function was difficult to negotiate. They knew they needed a system with a high degree of flexibility, the capacity for sales history reporting with many different variables, customisable reporting and an ‘end to end’ solution for streamlining inventory, warehousing, invoicing, deliveries and quoting. Ostendo had been recommended by a number of their brands due to its high degree of flexibility and seamless integration into MYOB Account Right.
Says Samantha, “we were looking at Ostendo and MYOB Account Right and came across ABC Business Solutions on the web. The service offered, price, and Carol’s vast knowledge base gave the impression that ABC was very proficient and could really see what I was looking for”.
In terms of installation, Samantha notes “they made installing MYOB Account Right and Ostendo sound like it was easy and it was. The process was very simple – the technology was installed and it worked. Anything that needed adaptation was fixed almost immediately. Donaugh was readily available and all the staff there were terrific. They get back to you when they say they will; and for me, that’s a big thing”.
Samantha was pleased to find that MYOB Account Right and Ostendo were so user friendly and easily navigated that within a couple of hours, she and her team were using the new system with confidence. She notes the installation and support “all just happened seamlessly”.
ABC Business Solutions performed extensive customisation for Wood Enterprises – the entirety of Wood’s invoicing is unique to them in setup and appearance, and ABC customised forms and reports for stock levels and stock codes, set up all end users and installed both the MYOB Account Right and Ostendo systems remotely. When asked if distance was an issue, Samantha notes “if we needed something we’d send an email, come back the next day and it was there. You can’t ask for more than that”.
“ABC Business Solutions don’t confuse you with technical jargon, they use real terms. Their follow through and follow up is really good, which is an area that can be lacking in other technical consultants, and if you have an issue they will answer back straight away”.
Wood Enterprises plan to meet the future still thriving and growing. In order to achieve this, as well as maintaining their reputation for service excellence, they are diversifying further into the project aspect of their business- supplying developers with products to kit out entire residential apartment blocks. Wood Enterprises are continually seeking out new architects and property developers, strengthening their ties with the building industry and always seeking new brands to feature.
Retaining ABC Business Solutions has set Wood Enterprises in the optimal place to meet their goals. MYOB Account Right and Ostendo have allowed warehousing to be centralised into the one department, enhancing load share. Wood have been able to employ additional data entry staff due to the simplified data entry process and additional security controls, which give Management confidence that allowing a wider range of staff access to the programme won’t result in issues downstream. These changes have freed up key staff members to focus on higher responsibilities within the business.
ABC Business Solutions continues to assist Wood Enterprises through ongoing support, further software customisation and troubleshooting.
Notes Samantha; “We see the relationship with ABC as a business partnership – that, into the future, they will be there beside us, helping us to meet our goals”.
Samantha Wood, (Administration)
Alpha Electrics began as a family business in 1967, when David Philips went into business for himself repairing electric motors for customers in his local area.
From these beginnings the business has grown to a mid sized company with three offices that specialises in the repair and rewind of electric motors. It is the largest company of its kind in the state, and has the capacity to offer a 24 hour breakdown service and equipment sophisticated enough to take on large scale work for the mining industry.
In order to remain relevant amidst vast and rapid advancements in technology. Alpha Electrics worked closely with their clientele and tailored their operations to meet emerging needs.
Alpha Electrics workforce was changing – whereas 15 years ago, the bulk of their employees would have been tasked with small equipment repair, retaining electricians on staff had given the capacity to install and service any product sold by Alpha Electrics, and retaining technicians on staff had enabled them to conduct on-site vibration testing to identify weaknesses with the aim of avoiding total shutdown.
Given the changing nature of motor manufacture. Alpha Electrics focus also had to shift back from an emphasis on repair and further into the area of sales. This meant tracking the retention and movement of stock, and required multi user login at three separate locations – a complexity their current systems – including MYOB Account Right – just weren’t coping with.
Partnering with ABC Business Solutions and MYOB EXO Business and Wageeasy Payroll and HR
Alpha Electrics were struggling with an unwieldy combination of MYOB Account Right, a locally made job costing program and various manual systems.
Says Tricia Marmion, Accounts Manager, “the only way we could run MYOB Account Right in three sites was to maintain three separate files at each location, which was very tedious”. They then installed MYOB EXO Business, but still had issues with jobs costing and accounting reporting.
Searching the internet one evening in frustration with their MYOB EXO Business support providers, Alpha’s General Manager Anthony Butler and Finance Manager Drew Beecham came across ABC Business Solutions.
“Drew was going to just start at the top of the list and work his way through until he found someone who could give us the answers we needed, but ABC Business Solutions was as far as he got!” says Tricia.
“The thing that sold him to start off with was that when he described some of the problems we were having with MYOB EXO Business and MYOB EXO Job Costing, Carol was able to anticipate other issues we were having, without even having been told. I remember Drew saying that after briefly describing one of the problems, Carol was able to offer a quick fix for the issue, whereas our previous MYOB EXO suppliers had not been able to identify there was a problem!”
“We had quite a bit of training with ABC, we had a lot of teleconferences where ABC would log into our systems and we would follow along as they mocked things up. Management also wanted a lot of customised reports within MYOB EXO Business Drew would have a conversation with ABC Business Solutions about his requirements, someone would usually create something for him to look at within 48 hours and it would be fine tuned and operational within a couple of follow-up conversations.”
“One of the initial concerns in choosing ABC was that we’re in Tasmania and they’re in Queensland, but it’s not been a problem at all – no different to us dealing with someone down here.”
Since partnering with ABC Business Solutions, Alpha Electrics has seen significant time savings. With thanks to MYOB EXO Business and Wageeasy Payroll and HR, the bulk of their Administrative and Financial paperwork can now be done from Head Office, instead of being performed in triplicate at each location.
Notes Tricia; “we’re finally confident that if we need the data, it will be there and it will be in the right place. Our new accountants are happy.”
Since then ABC Business Solutions have installed a new payroll system for Alpha Electrics called Wageeasy. Says Tricia “we were using MYOB Account Right and wanted an easier way, we had heard Wageeasy was quicker and had more information storage. After the initial installation, Jennifer walked us through a whole Wageeasy pay run via conference call – we did it once in the old MYOB Account Right file, then again in Wageeasy, so the few things that needed to be fixed were fixed there and then.”
“Jennifer seemed to know everything about the Wageeasy system, which was great because it meant there was no to-ing and fro-ing. Now that we’re set up, we’re at a point where if we have any hassles we send an email through and ABC respond either telling us how to fix it ourselves, or telling us that it’s fixed.”
Tricia notes that they will continue to need ABC’s help with Wageeasy, ongoing troubleshooting and additional customisation. “When we were having trouble with MYOB EXO Business, ABC Business Solutions had the accounting knowledge to understand what we were talking about, and they talked us through it all in real terms so we knew exactly what we were doing and exactly what needed to be done. They keep us up to date with advancements in software, suggested Wageeasy to us, and they’ve identified other timesheet add-ons to use with Wageeasy and MYOB EXO Business to save us even more time. Any other issues that arise with MYOB EXO Business or Wageeasy Payroll and HR, or areas we need help with; ABC Business Solutions are our software business partner of choice and are an experienced and knowledgeable first port of call for us.”
Moving forward, Alpha Electrics will continue to work closely with their clientele to find ways to identify emerging opportunities while also fine tuning their equipment and repair methods to keep at the forefront of technology and practices. ABC Business Solutions will be close to hand to ensure Alpha’s software and systems continue to run smoothly, effectively, and most importantly, responsively to Alpha Electric’s needs.
Tricia Marmion, Accounts Manager
The Village Retirement Group Pty Ltd
The Village Retirement Group Pty Ltd is a specialist retirement village operator / developer based in Brisbane. They are a private entity owned by Mr Michael Harrison and Mr Justin Harrison, and have been developing in South East Queensland for more than 35 years. The Group have brought many large developments to South East Queensland such as Pelican Waters, Belle Vista Estate, and the Brisbane City Council Building Indooroopilly, The Village on the Downs (Toowoomba) and more recently the Villages at Yeronga, Redcliffe and Coorparoo.
The Village Retirement Group have focused their business solely on the retirement living industry for the last 12 years.Collectively they have more than 1500 retirement village units presently being developed, with over 550 units within a five km radius of the Brisbane CBD.
They are the largest developer of privately owned owner/operated retirement villages in South East Queensland with over 1500 units approved and 495 units completed with:
- A proven track record in acquiring, developing, marketing, and operating profitable retirement villages
- A family orientated company with a mixture of youth and experience coupled with a value system whereby the village residents are treasured and respected
- The sole business focus for the last 12 years has been the retirement village industry
The Village Retirement Group as it stands now has been in operation for seven or eight years, with the Chairman of the business having been in the industry for the last 35 plus years and has a lot of experience.
The Group commenced because it identified that there was an aging population with a demand for independent living accommodation for the +65 age group.
There are three locations, The Village at Yeronga, The Village at Redcliffe and The Village at Coorparoo. The Yeronga and Coorparoo locations are multi storey while Redcliffe is single level. The Village at Yeronga has recently won a national award for Australia’s 2013 Best Seniors’ Living.
The Group has grown in terms of the number of people and systems, and mainly has full-time contractors and employs about 20 staff. Each project has external independent investors.
ABC Business Solutions assisting with Reporting
When looking for a new software system Ryan says “they needed to look for something that could handle multiple budgets and our debit order system for resident fees. Also we required monthly, quarterly and annual reporting to meet our audit requirements. Under the Retirement Villages Act all of the villages are fully audited and we are able to structure our reports into a format that was handy for the auditor because in MYOB Exo Business reporting is quite modifiable and flexible”.
Ryan says “We now have greater access to better information and we are still enhancing things as we go”.
Annette said “ABC Business Solutions has helped her personally for EOM and reporting. ABC Business Solutions has been great and any prompt requests have been dealt with very quickly”.
Partnering with ABC Business Solutions, MYOB EXO Business and Wage Easy
Ryan says “With the growth of the Group the model has stayed the same it was the internal systems that needed to be improved which included bringing ABC Business Solutions on board for a reporting system for the villages.
The accounting system needed a review by virtue of the fact that we needed proper invoicing systems for the residents. We need to control multiple budgets because we are a developing village; MYOB Exo Business is able to provide this. We also had additional volume so needed a better system to handle this growth. The previous system used was MYOB AccountRight.”
“We chose to move to ABC Business Solutions due to the level of accounting expertise with the IT experience that is provided”.
“We decided to move to Wage Easy for additional security and that it is purpose designed to payroll and HR software system”.
“Training in both MYOB Exo Business and Wage Easy is on an ad hoc basis and ongoing”.
Annette says she has found the direct debit facility “great and so easy, it made life much easier and cleaner, next I want to go to online payments”.
Annette has worked in Aged Care for a number of years. When asked if it has been beneficial that Carol and Jennifer’s understanding of independent living and Aged Care assisted her in anyway, Annette said “Yes the grounding has been good and the knowledge has been shared both ways. I can’t say a bad word about the service and training. My end of month is easier and response times to support requests by ABC Business Solutions and the support provided by Jennifer it is great”.
When asked if she has learnt much from Jennifer, Annette said “It’s really good, if I need a report tweaked to make my workflow and reporting easier, Jennifer is always very obliging”.
“MYOB Exo Business works really well in this industry and I don’t have any negative comments, although it does take a little time to find your way around. It’s great having a test file set up so I can see how something will work. The safeguards in the system are great. My audits have always gone very smoothly, as the accountability is very good”.
Ryan notes that moving forward The Village Retirement Group will need ongoing assistance with reporting and troubleshooting. ABC Business Solutions has always been pretty speedy when help is requested. Jennifer comes in and assists with end of year tidy up.
Annette says “Thank you very much to Jennifer and the team at ABC, the village is growing and couldn’t do it without you”.
Ryan Knowles, CFO, The Village Retirement Group and Annette Kechagias – Assistant Manager The Village at Yeronga.
For assistance with setting up retirement village operational software please contact us at abc50plus.
Waroona, Western Australia
Schlam Welding was established 15 years ago by a fabrication/boilermaker with an already small number of clientele. On the 1st of October, 2010 Schlam Welding introduced a new entity into their company, Schlam Engineering.
The company depicts itself as a medium size engineering and maintenance company specialising in Heavy fabrication, CNC machining and earthmoving equipment maintenance. Their Head Office and Warehouse is located in Waroona, Western Australia.
The company has had a successful and rapid expansion in the last three years. Schlam have consolidated the growth in the last year and have developed their growth strategy to guide the business through the next stage of development.
Throughout the recent rapid growth expansion, they have made planned changes to refine processes and made changes to formalise their company. Schlam plan to grow and move forward, aligning their business practices with ISO 9001 Accreditation requirements. Since planning new changes, Schlam are also developing new objectives to create a bigger sales target & improve their budgeting and reporting processes.
Schlam Engineering installed MYOB EXO Business for the company approximately 4 years ago. Before MYOB EXO Business, Financial Officer Robert Hassall, remembered the company doing most of their job costing on paper.
“We needed something more automated and as our company was growing, we needed something more professional. We installed MYOB EXO Business just before our company started to grow, and we were lucky we had it – as it helped during our rapid growth.”
Partnering with ABC Business Solutions and MYOB EXO Business
After realising they needed more support with the MYOB EXO Business software, Robert Hassall enrolled in ABC Business Solutions 3 day MYOB EXO Headstart Course, where he met ABC Business Solutions Director, Carol Roberts.
“The advantage that ABC had as a software partner was that they were Management Accountants specialising in managerial work. They also had a good number of staff members available for support with qualifications that were relevant.”
“We are not in the same town, a lot of the tasks are done over the phone or via remote connection, but they are easy to connect with and have good communication over email.”
“ABC are also a professional and knowledgeable business. The questions I have asked them in the past they have either known the answer to or get back to me with the answer.”
Since installing MYOB EXO Business and partnering with ABC Business Solutions, Schlam Engineering have developed different processes and Robert Hassall has been able to take on MYOB EXO Business himself and has capably proceed to the next step each time.
They are now using MYOB EXO Business to manage sale targets, budgets, financial reports, branch KPI’s and stock control. This is integral to achieving their business objectives.
“24 months ago our stock control was poor, until ABC came along.”
“ABC understands how our business operates and MYOB EXO Business has been tailored to suit our business needs. We also made changes to our Terminal Server which ABC worked on with our IT Consultants. They communicated together to decide on the best fit for our company.”
|5 Year Plan|
Schlam Engineering plan to expand in the following ways over the next 5 years:– Grow satellite sites
– Have more work sites down south and in the Pilbara
– Open a new warehouse in Perth
– Increase their sales
– Maintain their ISO 9001 Accreditation
– Expand their clientele
AUTOMATED POSITIONING SYSTEMS
Archerfield, Queensland Australia
Automated Positioning Systems was established on the 1st July 2002. The company develops and supplies machine management systems for mining and earthmoving mobile equipment. They offer integrated solutions which merge GNSS spatial information and advance database technologies to help manage a wide range of equipment found on most mining sites. Their technologies help the productivity, utilisation and safe operation of the mining equipment.
Automated Positioning Systems depicts itself as a medium size company and is based in Acherfield in Queensland Australia.
At present, Automated Positioning Services have not developed into different markets and their managers continue to strive for the same objectives each year.
With these same objectives still in place, Automated Positioning Systems has evolved. They have expanded their customer base and have developed their business into North America. With such an expansion, they have required more personnel, equipment and tracking inventory.
The time came for them to realise they required an IT and Software review when their current QuickBooks system was not sufficient, and they needed an extra level of software.
The main change in the business that made them decide they needed a new software system was their Inventory Control including warehousing, serial number tracking, kit building and cost control.
Partnering with ABC Business Solutions and Ostendo
Kirby Grimes, the accountant for Automated Positioning Systems mentioned that “the knowledge of software” ABC Business Solutions has, was an advantage when choosing software partners.
Kirby Grimes also noted that having a mid sized group with different staff was an advantage, as well as the support she receives from her ABC Consultant:
“Our ABC Consultant is great. She is helpful and investigates any issues that we have. ”
Automated Positioning Systems has changed their process and roles now with the implementation of Ostendo.
“We have changed our process with our Inventory Control and follow the guidelines of the Ostendo program.”
Kirby Grimes notes that the way ABC has set up the Ostendo system and how ABC have trained them also encouraged them to do processes differently.
“ABC Business Solutions give us guidance on how do things differently and I have had previous discussions with ABC on how to get Ostendo to work with us.”
In regards of Automated Positioning Systems moving forward, there is a 5 year plan in place. However, their level of reporting is the main focus.
“The original reporting in Ostendo was not sufficient, we needed full customised management reports and a higher level of reporting to move forward.” Ostendo has a full report writer facility.
“Not a month goes past that I am not having training with ABC for help and guidance on different platforms.”
Automated Positioning Systems has plans to expand their warehouse and inventory holdings in Australia, as well as setting up the company over in North America to have the same structure.
“ABC Business Solutions are continuing to assist with ongoing issues, which will support us in moving forward.”
“ABC Business Solutions staff listen and help me. They investigate and are aware of our outstanding tasks. Our consultant always touch’s base with me to give me updates on anything outstanding.”
Kirby Grimes, Accounts, Automated Positioning Systems
DM BREAKER GROUP
Malaga, Western Australia
DM Breaker Group consists of two companies. DMB Fluid Technologies specialises in supplying accessories to construction and mining equipment, while DM Breaker Equipment specialises in attachments for construction and mining equipment.
DM Breaker Equipment was founded in 1991, with DMB Fluid Technologies starting in 2002. The companies were formed when an opportunity arose to develop into a niche market using only a single product. They are located in Malaga, Western Australia and depict themselves as a medium based company.
Partnering with ABC Business Solutions and MYOB EXO Business
DM Breaker Group were using MYOB Premier previously. They required software for their large number of stock items, as well as the use of job costing, however it was found that MYOB Premier could not handle their needs and they experienced many software crashes. This was the point at which they knew they needed to change.
Michael Marriott notes, “ABC helped us with the hurdles”. If he needs help with customisation, ABC is able to do it for him. ABC also helps with their IT problems, for example, their software crashing when working with Outlook.
“Carol has engaged someone to have a look at it for us. The training I have had with ABC has been professional and accurate.”
Their processes have now changed with the new staff and Michael Marriott talks about employing more staff, even though the change is inevitable with the business.
“We have employed extra people to do the processes.”
Michael Marriott also notes that they do procedures and roles differently now due to the way ABC have set up their system and how ABC have trained them.
Michael Marriott, General Manager, has seen the business evolve over the past years. He has seen DM Breaker Equipment sustain a steady growth, and seen DMB Fluid Technologies sustain a high growth. He notes that due to unforeseen circumstances, DMB Fluid Technologies did decline business wise for a small time, however they have managed to pick the company up and bring the growth substantially back to where it was before.
Michael Marriott comments:
“We always strive to improve efficiency and professionalism within our Accessory division [DMB Fluid Technologies] to grow rapidly and push to improve. We also do the same for our Equipment division [DM Breaker Equipment].”
Michael Marriott mentions that their core business is still holding the same objectives and has not had a need to develop into different markets. However, as they grow and improve, they will be able to expand.
“We have a way to go to get the program to where we want it to be. ABC is working closely to assist us. They are outsourcing add on’s to make the program add extra value.”
DM Breaker Group have a 5 year plan in place. They plan to expand into other regions, and have also come across opportunities to expand overseas.
“For ABC to assist, they just need to continue doing what they are doing.”
Michael Marriott also makes the same comment in regards to developing a long term relationship between DM Breaker Group and ABC Business Solutions. When asked how can ABC ensure a long term relationship with his company, Michael Marriott stated “They already are.”
Michael Marriott, General Manager, DM Breaker Group
Murrarie, Queensland Australia
Aus Meat Limited commenced in 1992, and is incorporated with Meat and Livestock Australia and the Australian Meat Processor Corporation. Aus Meat is responsible for setting standards for meat for export under Regulation 3 of the Australian Meat and Livestock Industry.
They offer a range of services to the Meat and Livestock Industries including Management, Auditing, Training and Consultancy. Their main charter is to provide services to the Meat and Livestock Industry. Aus Meat Limited is a large company located in Murrarie, Queensland Australia.
Partnering with ABC Business Solutions and Wage Easy
Aus Meat realised a change was required for the software review when their industry needs changed. They decided on implementing Wage Easy to handle all of their payroll needs. With a large number of employees in Australia and two employees in New Zealand, Wage Easy was the perfect fit for their business.
Elise LePage-King, HR Manager for Aus Meat Limited, noted that it was the skill ABC Business Solutions had with Wage Easy which was the advantage with choosing ABC as their software partner.
“Working with Jennifer made the process easier. I still have Jennifer do our End of Year.”
Elise LePage-King said that their company uses the consultancy service well.”
Previously using MYOB Account Right for their payroll, Elise LePage-King comments “Wage Easy is better suited to the company and we definitely benefit from it.”
Since using the new software, Elise LePage-King also mentioned that they do their business processes and roles “significantly differently” with the way ABC Business Solutions has set up their Wage Easy.
“We get assistance from Jennifer when we need it and she always has quick responses for us.”
“ABC is assisting us in moving forward with keeping us up to date with our software. They ensure our payroll system works for what we need to do and the service that ABC provides works.”
Aus Meat have always kept the same goals to service their clients and have not found the need to develop into different markets. Over the past few years, Aus Meat have watched their company evolve extensively and as much as their industry needs have dictated.
They have increased in staff members, programs and turn over. However, as large as they have evolved, they are still a not for profit business.
Aus Meat have a 5 year plan in place and are looking at growing and expanding their company over the future years. Every year they are planning to expand by a small percent each time, so they can stay in control with the ever evolving company.
To expand they plan to communicate with their clients to see where the growth is needed and hope to increase the ability to service the agricultural industry.
Elise LePage-King said that ABC can assist in their future and be a part of a long term relationship. To develop this long term relationship, Elise LePage-King made the powerful statement:
“ABC Business Solutions needs to just keep doing what they are doing.”
Elise LePage-King, Human Resources Manager, Aus Meat Limited
NQ CRASH & 4WD SPARES
Cairns, North Queensland, Australia
NQ Crash & 4WD Spares, a major parts supplier in the Cairns region and surrounding districts, was established in 1999. They are a medium sized, family automotive company who specialise in supplying automotive replacement and accessory items, including both new and used parts.
Partnering with ABC Business Solutions and MYOB EXO
Josh Milligan noted that the increase in their number of staff, who needed to use operational software, was one of the main reasons they changed their software system to MYOB EXO Business. They also needed a program that could handle a web site link and international currency, all of which is imperative for their company.
Their essential requirements were vehicle tracking, parts tracking from disassembly of second hand vehicles, point of sale and inventory control.
They also wanted to automate their sales from the web straight into MYOB EXO Business.
“We discovered ABC Business Solutions through contacting MYOB. When I spoke to MYOB, I explained our needs and wants and they put me straight onto ABC Business Solutions.”
“The advantage of ABC Business Solutions was their knowledge of software.”
Josh also noted “The support from ABC Business Solutions is a big advantage as software partners. They are able to sort any issues and fix any mistakes that we make.”
Since partnering with ABC Business Solutions, NQ Crash and 4WD Spares have noticed a decrease in their double handling of data and processes.
“The modifications to MYOB EXO Business, made by ABC Business Solutions, including extra add-ons that allow us to search by parts and vehicles, has allowed us to streamline our Used Parts straight in MYOB EXO Business. Everything is now in the computer system and there are a lot less manual records.”
The business has evolved as Josh Milligan, Manager, explains “We have grown over the past few years. In the last 5 or 6 years, our sales have expanded and so have our customer needs. Most of our changes have been planned.”
During the changes, NQ Crash & 4WD Spares made the decision to develop into different markets and branches, such as Social Media for their company advertising and promoting.
“ABC Business Solutions are helping us move forward. We are happy to be able to streamline our products now. When I ring or email ABC Business Solutions and ask their advice on what would be the best way to do something, they are able to assist us, either by showing us existing ways or creating new processes for us.”
NQ Crash and 4WD Spares have a five year plan in place. They are focusing on evolving their online and social media presence. Their online store is commencing and ABC have assisted in integrating between their products straight through to MYOB EXO Business.
“ABC Business Solutions have set it up so that I can take items on or off in EXO, or change prices, and it automatically updates online.”
Josh explains that he has “fantastic support” with ABC Business Solutions and they have provided great assistance in their moving forward.
“ABC Business Solutions have always been excellent and I can see a future relationship with them. They have been great in the past 12 months and I only see it getting better. Everything they do is exceptional and they always make sure to follow up with us.”
Josh Milligan, Manager, NQ Crash & 4WD Spares
Townsville, Queensland Australia
Founded in 1980, Proscitech began its’ training in the bottom of a residential house in Townsville, Queensland. Eight years on, the company has built a commercial building and has gone from residing in only a quarter of the building, to half of it.
Proscitech was born due to the noticed difficulty in accessing laboratory supplies in Australia, with both appropriate pricing and timeframes.
Their stock range has expanded greatly, from only stocking Electron Microscopy to now stocking almost all necessary laboratory supplies.
Margaret Darley, Business Owner, was having a lot of difficulty with their MYOB EXO Business.
“MYOB EXO Business was not running the way it was meant to. Many things needed to be fixed and the migrate was not working properly.”
“I came across ABC Business Solutions on the internet. We were in a lot of trouble with our system and I was looking for a solution. I sent through an enquiry via ABC Business Solutions website. When Carol Roberts called me back, she made me breathe a sigh of relief. I remember her telling me: ‘that’s fine’ and ‘this can be fixed’. I remember thinking: ‘this is just fabulous!'”
Partnering with ABC Business Solutions and MYOB EXO Business
ABC Business Solutions then commenced to assist Proscitech by taking over their MYOB EXO Business file. Modifications by ABC Business Solutions were made to their reports and forms, so that Margaret and the team would be able to work more efficiently within their MYOB EXO Business Software.
Margaret comments on the skills and knowledge that ABC Business Solutions have with MYOB EXO Business: “Our MYOB EXO Business is now running correctly. ABC Business Solutions were able to fix the main workings of the system and all the entails were repaired. The migrate issues were also fixed by ABC Business Solutions.”
“We now have our on costs right, which is invaluable to us. MYOB EXO Business also integrates very well and all our products and pricing go straight on our website.”
Margaret also agrees that the quality of accounting she can now get out of MYOB EXO Business, since ABC Business Solutions took over, has improved greatly.
Partnering with ABC Business Solutions and Wage Easy Payroll & HR
It was then recommended by ABC Business Solutions that Proscitech make the change to Wage Easy Payroll & HR Software.
“ABC Business Solutions recommended Wage Easy to us, due to it being an easy program to operate and a system that would suit Proscitech better.”
“ABC Business Solutions also made sure our Wage Easy integrated with our MYOB EXO business, and because of this I no longer have to double key, which is a big plus. I am very pleased with this recommendation.”
Wage Easy Payroll & HR was set up by ABC Business Solutions from scratch for Proscitech. Margaret received one on one training for the program from ABC Business Solutions Wage Easy Consultant, Jennifer Glisson.
ABC Business Solutions then assisted Proscitech further by customising the system for them. Margaret comments: “It works beautifully!”
Margaret agrees that Wage Easy Payroll & HR benefits her company: “The simplicity of the program and the fact that it only takes half an hour to do wages now, adds a lot of value to our company.”
With MYOB EXO Business now working correctly and Wage Easy Payroll & HR installed and set up, Proscitech have noticed a change in the way they carry out business processes. Margaret says they are able to receipt goods and cost goods as well as MYOB EXO Business handling all on landed costs. They are also able to set more realistic margins.
“We do various things differently now that we have ABC Business Solutions. Such as receipting and ordering goods, credits, costings and stocktake.”
ABC Business Solutions is still assisting Proscitech to move forward. Margaret mentions that ABC Business Solutions keep her up to date with the new Tax Rates and all upgrades within the Wage Easy and MYOB EXO Business software.
“ABC Business Solutions give constant support and they are always there when we need them.”
Noosa, Sunshine Coast, Australia
Noosa Longboards is a retail surf lifestyle and culture store. Originating in 1994, Noosa Longboards was started by a surfer with a passion not just for surfing, but for the history and culture of surfing.
The store sells surfboards and surf wear, as well as surfing collectables and memorabilia.
Over the past years, the shop has evolved to keep attune with the continuous changes in the retail world.
Julie also notes recent challenges with the Global Financial Crisis, decrease in the tourism trade at the Sunshine Coast and the new online trends that the business has had to contend with. She has watched the company evolve around these challenges and has made changes to the
business accordingly. Their big decision was consolidating the three stores.
“We decided to concentrate on what we call our ‘signature store’, which we have made bigger and better.” says Julie Bray, Accounts Manager.
“Over the past few years, we have also set up an online store, and chose to move the location of the store. We are now really focusing on the Noosa Longboards branding.
“We try to vary in the market a lot, and do not want to just sell to the teenager demographic. We aim to target all ages interested in the surfing culture.”
Partnering with ABC Business Solutions and Ostendo
Julie knew the company required a software change when there was an increase in growth, and they lacked suitable reporting.
“Growth and reporting were the two reasons we needed a change in software. Our requirements were a better reporting system, so we could watch margins etc. as well as an easy to use Point of Sale system, that would be timesaving. The system needed to handle barcodes and catalogues.”
“We came across ABC Business Solutions through recommendation. ABC Business Solutions also had knowledge of business, which was an advantage to us.”
ABC Business Solutions then introduced Noosa Longboards to Ostendo, and managed the installation, set up and training for Julie and the Noosa Longboards team.
“Before the initial change over, ABC Business Solutions collected all of our data and company information from our old system and transferred it to the new system for us. They customised specialised reports for us.”
“We had quite a lot of training. Our initial training was through gotomeeting with ABC Consultants. We were also able to have evening sessions with them, as we trade 7 days a week and needed training out of hours.
“After we went live, we were able to continue having sessions with ABC Business Solutions whenever we needed.”
Julie notes her favourite parts of the Ostendo Point of Sale module, “The Point of Sale in Ostendo is easy to drill down and find information in. It also imports the information straight into MYOB AccountRight, which is really important and really good. From the retail staff point of view, they find the Point of Sale easy to work with, and it has been customised to suit our needs.
Noosa Longboards used Ostendo and Point of Sale on a terminal Server with different locations.
“The existing reports in Ostendo were basic. So we had a report for ‘sales by item’ and ‘sales by category’ report written by ABC Business Solutions, within Ostendo’s Report Writer platform.
“I use the reporting in Ostendo for sales and margin reports and monthly inventory reports. From the back end point of view, I can get a lot of information and I find it powerful.”
In regards to stock control in Ostendo, Julie admits they don’t do enough. “I know we can use the system to do full stocktakes or smaller ones, we need to start using it more. Ostendo does what it needs to do to handle our stock.”
Julie also mentions the ease of the ODBC link from Ostendo to MYOB AccountRight, “It is very easy to track batches and makes finishing the BAS in MYOB AccountRight simple. There is no double entering and it is instantaneous. In the old system, I used to have to wait and only do it weekly. There was a lot of guess work like that. This ODBC link is very good.”
“With the new software solution we now have, we have a lot more focus on the front end. We do more stock control and entry. We find Ostendo easy to enter goods and set up new items. We also now use supplier barcodes.”
ABC Business Solutions has helped Noosa Longboards move forward during their business development and economic climate “ABC Business Solutions assisted us with our additional store locations [before the consolidation] and created a separate database for us.”
Julie also notes that the specialised reports which ABC Business Solutions built for them, has helped them in moving forward.
“We are set up now, and don’t need as much from ABC Business Solutions, unless there is a query or something needs to be set up. However, it is good to know ABC Business Solutions and their Ostendo Consultants, with all of their retail background knowledge, are there if needed. They are really helpful.”
“There is a chance of another expansion again soon, which we will need ABC Business Solutions to assist with once more.”
Julie Bray, Account Manager, Noosa Longboards
Termatrac describes itself as a small business which designs, manufactures and distributes electronic detection units for the Pest Control industry.
The company began when the founder, himself a pest control operator, wished he could discover termites through a wall like the fish finder radar on his boat could show him where there were fish under the water. He invented a device which uses a very low power microwave beam to detect the constant movement of termites through most common building materials.
Over the past 10 years, Termatrac has grown from a small family business to a multimillion dollar company with distributors in 7 countries and customers in more than 30 countries. Termatrac recently opened an office and distribution centre in the United States.
Termatrac design and manufacture all of the electronics locally in Australia, and ship globally. “Inventory control is critical to our business”, said Amanda Doubikin, the company’s Financial Controller. “Many of the components have very long lead time and we want to ensure we have all the components we need when we have to do a production run”. “We also need to track every unit we ship, to ensure they come back for Calibration each year”.
Termatrac were aware that they needed software more sophisticated than the typical small business accounting package.
Partnering with ABC Business Solutions and MYOB EXO Business
Termatrac were introduced to ABC Business Solutions by their bookkeeper during a period when they were having numerous issues with their software.
“Our bookkeeper highly recommended ABC Business Solutions. She spoke highly of Carol Roberts and the company, and told us they would be the only ones capable of fixing our issues.”
“We chose ABC Business Solutions as our software partner because they had the whole package. Not only accounting knowledge, but accounting knowledge with IT skills. ABC Business Solutions understand what we want and at the same time the compatibility of the software. It is a huge plus when you have a team of people who work together.”
“ABC Business Solutions cost accounting knowledge is also important to us, as we are in manufacturing.”
Termatrac sent two of their staff members on ABC Business Solutions MYOB EXO HeadStart Course.
“I learnt a lot at the course. I was a beginner to EXO and had just joined the company. I was afraid of the software and was only doing basic things. This course taught me how to use EXO.”
ABC Business Solutions also assisted in setting up new EXO files for Termatrac.
“We had ABC Business Solutions set up new files for us. It was all very positive and all the time lines were met. It was a rushed time and ABC Business Solutions were very helpful with that.”
ABC Business Solutions also assisted with Termatrac’s EXO Payroll.
“Every time I need help I always get a reply, and the issue is always sorted if not that day, in a timely fashion. I am always in the loop, Jennifer Glisson keeps us in the know and updated on issues. We never have to question her, she communicates well and that gives us confidence.”
Amanda notices they now have a reduced number of systems being used everyday and also save time on researching different serial numbers, due to the way the software has been set up for them.
“Jennifer has sat down with me and shown me new things in EXO with the new update. She has shown me new tricks with the reporting, and it is now a lot quicker for me to organise reports for the board.”
Termatrac have a five year plan and agree that ABC Business Solutions is assisting with the company moving forward, by being on call for them all the time.
“ABC Business Solutions can continue to assist us with providing back up when needed. I know I can always call on them. I never have to think about the software, such as annual licences and updates, as I know ABC looks after it all for us. It’s reassuring and keeps us confident.”
Amanda Doubikin, Accounts, Termatrac
C.EDE PTY LTD
Townsville, North Queensland
C.EDE PTY LTD, established in 1915, is a canvas manufacturing company situated in Townsville, North Queensland. They specialize in canvas & vinyl products, shade sails & external blinds & awnings for both commercial and residential clients.
C.EDE PTY LTD is a family owned company.
Business is constantly evolving for C.EDE PTY LTD as they are a well known company in Townsville with a steady client base. No extreme changes have been made within the company and they find themselves sitting comfortably within the same markets and keeping the same objectives from the beginning.
C.EDE PTY LTD has always used a MS- DOS Based system for the past 30 odd years..
Coming into the 21st century the company realized they needed to move away from their DOS based system to start operating a custom made software that allowed them the ability to have flexible Assembly Orders and Bill of Materials.
“We are a manufacturing company, so every job is different and we needed a flexible software program.” Bronwyn Ede, Office Manager, Fourth Generation Family Member.
Partnering with ABC Business Solutions and Ostendo
“We changed software to MYOB AccountRight & after speaking to a few people, we were referred to Ostendo and ABC Business Solutions.”
“When I spoke to ABC Business Solutions, I confirmed that they would be able to provide a solution for manufacturing and Bill of Materials.”
“I had to also confirm that Ostendo would be able to handle both retail and manufacturing- as a program to handle both was hard to find.”
ABC Business Solutions managed the set up and training of Ostendo, along side C.EDE PTY LTD.
“We received a lot of training from ABC Business Solutions. Our consultant was there whenever we needed her.”
C.EDE PTY LTD received their training from ABC Business Solutions remotely, through GoToMeeting.
As well as the set up and training of Ostendo, ABC Business Solutions also assisted with the customization of forms and reports for C.EDE PTY LTD.
“We had a lot of customizing done on our forms and reports. ABC Business Solutions are able to customise to what we want and need.”
ABC Business Solutions set up an ODBC link to connect MYOB AccountRight and Ostendo. “Now with an integrated system, it is easier for our accountant, saves double entering & is definitely a change for the better!”
Bronwyn comments on the use of Ostendo in a manufacturing industry: “Ostendo handles all of our Bill of Materials and Assembly Orders which is what you need for a manufacturing industry.”
“Ostendo is excellent for keeping track of stock via the Retail & Assembly Order side of things. Our Job Costing is much better than our previous system & having the ability to link with MYOB is fantastic”
Needing little assistance from ABC Business Solutions now, Bronwyn mentions that with the company moving forward “It is good to have ABC Business Solutions on hand, if there are ever any issues.”
There is a five year plan in place with C.EDE PTY LTD’s 100th anniversary coming up, They are planning on continuing to upgrade the company and modernize, including their company website.
In regards to the relationship with ABC Business Solutions developing: “Having ABC Business Solutions on call if we need possible training is helpful, we understand the system more and more everyday.”
Bronwyn Ede, Office Manager, C.EDE PTY LTD
Central Coast, New South Wales
5P Group is a design and marketing retail business. Commencing in 2001, 5P Group started as marketing consultants, when they saw a gap in the industry and joined partnership with Pop Strategic, an industry design company.
Their Head Office is based on the Central Coast of New South Wales, and has offices in Sydney, Melbourne and Queensland.
Internally and externally, Jennifer Porter, Business Owner & Director, has seen many changes in the company’s evolution. With the company now 10 years old, Jennifer has seen growth in their target market and change within the internal processes and roles.
“Each year I nominate three objectives for the company. We have really refined our target market and also our internal focus. We increase our focus each year. With our target market, we are now concentrating on whom we do business with. We look more for enjoyment with good customers and are now more selective.”
ABC Business Solutions assisting with Management Accounting
Not only does ABC Business Solutions offer set up and ongoing training and support to 5P Group, but Jennifer Glisson also does 10 hours a month of Management Accounting for the company.
“Jennifer Glisson works with our full time Accounts Clerk at end of month. Jennifer Glisson does the adjustments and prepares data from a top line point of view.”
“Jennifer Glisson also is involved in our board meetings. She presents the figures, as well as a review on profit and loss, our trading statement, balance sheet and also updates us on any outstanding special projects that she is working on for us.”
“We have only had experience with one other consulting firm, what I can say is different with ABC Business Solutions is that the level of support from ABC Business Solutions is good.”
“ABC Business Solutions will continue to work with us as Management Accountants. I am really happy with that. There is a partnership there.”
In regards to ABC Business Solutions assisting 5P Group with moving forward, there are some areas in their IT and cash flow that needs improvement, and ABC Business Solutions are bringing that together.
“For example, we have a large excel spread sheet for quoting that is very labour intensive. We are looking at having this automated next year.”
“We are continuing to work with ABC Business Solutions to continue improvement, and taking out all of the labour intensive areas. I am looking forward to working with ABC Business Solutions in the next year.”
Jennifer Porter, Business Owner and Director, 5P Group
Partnering with ABC Business Solutions and MYOB EXO Business and Ostendo
5P Group were previously using other manufacturing software, with MYOB EXO Business. But due to implementation issues, their team did not learn how to use the software properly, thus inaccurate data was being produced.
“We were in a position to look at a new system. We did not know what the issue was, whether it was the team not using the software correctly, or if it was the software.”
“Our requirements with new software were mainly support and training.”
“My business partner came across ABC Business Solutions in a Google search. We were looking at a few different software consultants.”
“However, we chose ABC Business Solutions as they came down to New South Wales and gave a presentation to us. They took us through what our system would allow us to do.”
ABC Business Solution’s then introduced 5P Group to Ostendo.
“We already had MYOB EXO Business, and were running MYOB EXO Business and other production software, when we got frustrated over the incorrect data. We were happy with MYOB EXO Business, so looked for another company that could support us. ABC Business Solutions then introduced us to Ostendo.”
“We now integrate Ostendo and MYOB EXO Business for manufacturing.”
“The stock and jobs management in Ostendo does what we want it to do. From my point of view, the accuracy in data is important. And the production team work well in Ostendo.”
5P Group has Wage Easy implemented by Jennifer Glisson for their payroll. “My Accounts Clerk has found Wage Easy a lot easier to use.”
ABC Business Solutions assisted 5P Group with the set up of Ostendo and also the fix up of their existing MYOB EXO Business File.
“There was a lot of work that had to be done. ABC Business Solutions had to go through each item, line by line and fix errors. The files had to be adjusted and cleaned. There was a lot of fixing to do.”
“ABC Business Solutions support and train our team. They are really more like business partners to us. ABC Business Solutions have always been
there for help and have backed us up. I was looking for ongoing support, and ABC Business Solutions are good at that.”
“I can call them at a drop of a hat and they can answer all of my questions.”
ABC Business Solutions provided 5P Group with 6 months worth of training on both MYOB EXO Business and Ostendo. There are still team members continuing with training.
“Most of our training was over the phone. However, when we went live, Jennifer Glisson came down to us for a week.”
Jennifer Porter is now able to manage her business remotely, and spent a month this year working on the other side of the world.
“It is great. It is one of the bonuses of working with the system. I have accounting data at my fingertips and I love it. It is a big difference.”
ABC Business Solutions developer, Donaugh Austin, also spent time customising reports for 5P Group. The customised reports included a Cash Flow Report, which shows us how much is owing at anytime. It also included a Trading Statement which includes profit and loss, current year, year to date and breaks down the business by sub sections. Jennifer is also able to see the budgets.
Hemmant, Brisbane, Australia
Nichols Bros. has been at the fore front of the Australian boating industry since Roy Nichols established the company in August 1946. Roy could see an opportunity to build small fishing dinghies for the local fishing fleet down at Wynnum and from there it escalated to a niche market for the general public to go boating.
In 1960 the Cruise Craft brand was launched and became more pleasure craft oriented and full model boat, followed by its first fibreglass model in 1967.
It also was way back then that the name Nichols Bros. became synonymous with an unrelenting commitment to design excellence and manufacturing quality.
Nichols Bros.is a third generation family business which is unique in the boat building industry. With around 14 Boat of The Year titles as well as other accolades to its credit, Cruise Craft still continues to lead the industry in design excellence, innovation and quality. Nathan says ‘we don’t really work ,we get to create peoples aspirations to enjoy with the family, a boat is not a disposable item, it is a lifestyle and is not an item that you need but it is a want’.
Nathan said ‘when using MYOB we were asking the program to do something it wasn’t capable of. We were looking for an easier way of managing our costs and making sure everything was being accounted for or allocated correctly’.
What is Activity Based Costing?
Activity based costing ABC is a method for assigning costs to products, services projects, tasks, or acquisitions, based on
- Activities that go into them.
- Resources consumed by these activities.
ABC contrasts with traditional costing (cost accounting), which sometimes assigns costs using somewhat arbitrary allocation percentages for overhead or the so-called indirect costs. As a result, ABC and traditional cost accounting can estimate cost of goods sold and gross margin very differently for individual products. Contradictory and uncertain cost estimates can be a problem when management needs to know exactly which products are profitable and which are selling at a loss.
What Are the Benefits of ABC?
Cost accountants know that traditional cost accounting can hide or distort information on the costs of individual products and services—especially where local cost allocation rules misrepresent actual resource usage. As a result, the move to ABC is usually driven by a need to understand the "true costs" of individual products and services more accurately. Companies implement activity based costing in order to:
- Identify individual products that are unprofitable.
- Improve production process efficiency.
- Price products appropriately, with the help of accurate product cost information.
- Reveal unnecessary costs that can be eliminated.
Firms that use ABC consistently to pursue these objectives are practicing activity based management ABM.
ABC Impacts the Same Accounts, But With Different Mathematics
Note that the purpose of ABC is to provide information for decision support and planning. ABC by itself usually has little or no impact on the structure of the firm's financial accounting reports (Income statement, Balance sheet, or Cash flow statement). This is because both ABC and traditional costing ultimately assign costs to the same existing accounts. The two approaches simply use different mathematics to do so.
Note especially, however, that ABC sometimes brings improvements in reported margins and profitability. These outcomes follow when ABC reveals unnecessary or inflated costs, or when ABC shows where to adjust pricing models, work flow process, or the product mix.
Explaining Activity Based Costing in Context
This article further defines, explains, and illustrates activity based costing using example calculations to contrast ABC with traditional cost accounting. Examples appear in context with related terms from the fields of budgeting, cost accounting, and financial accounting.
- For the accountant's role in costing, see the article Accountant.
- The article Cost Object defines and explains the term "cost object."
- The article Direct and Indirect Labor Costs further explains the role of these terms in traditional cost accounting.
Why Do Companies and Organizations Move to ABC?
What are the Reasons for Using Activity Based Costing?
Business people are moved to adopt ABC by a desire to improve costing accuracy, especially to get closer to the true cost and true profitability of individual products and services. And, they also move to ABC in order to understand better the true costs and return on investment from projects, programs, or other initiatives.
ABC pursues these objectives essentially by making direct costs out of many costs that traditional cost accounting treats as indirect costs. Examples below show how this is done.
Organizations that use ABC consistently and effectively are said to practice activity based management (ABM). Here, management turns to ABC to support decisions about pricing, adding or deleting items from the product portfolio, choosing between outsourcing and in-house production, and evaluating process improvement initiatives. For more on ABM, see the section below "What is activity based management?"
The percentage of organizations currently using activity based costing varies greatly from industry to industry. Various surveys in the period 2012-2017 report the highest percentage of firms using ABC in manufacturing (20%-50%), followed by financial services (15-25%), public sector (12-18%), and communications (6-12%).
Activity Based Costing vs. Traditional Cost Accounting
What Are the Differences? Do They Lead to Different Costing Results?
The different approaches and outcomes from ABC and traditional costing are easiest to illustrate in the context of a product manufacturing example. However, the principles shown here extend readily to a wide range of other business settings.
Example: Traditional Cost Accounting vs. ABC
For example, consider a firm that manufactures automobile parts through a sequence of machine operations on metal stock. In such settings, traditional accounting views product production costs as either direct costs or indirect costs (or overhead).
Example Sources of Direct Costs
Traditionally, direct costs for such firms are costs they can assign to specific product units. In product manufacturing, these might include direct materials and direct labor costs:
- Direct labor costs.
These can include the cost for person minutes or person hours per product unit for running production machines.
- Direct materials.
Direct materials costs might include costs per product unit for metal stock, fasteners, and lubricants.
Example Sources of Indirect Costs
Traditionally, indirect costs for such firms are manufacturing overhead costs they cannot assign directly to specific product units. Instead, they allocate these costs to specific production runs, batches, or time periods. These might include indirect costs such as the following:
- Materials purchase order costs.
Firms typically do not order materials for each product unit, but rather, for entire batch runs. They may also order supply materials to cover a specific time period.
- Machine set up costs.
Manufacturing firms do not set up production machines for each product unit. They are set up instead for the production run of each product model.
- Product packaging costs.
Manufacturers can sometimes package multiple product units in a single package. And, they may fill multiple packages in a single packaging run.
- Machine testing and calibration costs.
Manufacturing firms perform these operations regularly and often, but not for each individual product unit.
- Machine maintenance and cleaning costs.
Firms normally perform these operations only after producing multiple product units.
Product Specific Cost Sources
For this example, consider a firm that manufactures and sells two product models, Model A and Model B. Some aspects of A and B compare as shown in Table 1:
|Products Compared||Product A||Product B|
|Selling Price||Higher price||Lower price|
|Materials purchased||More materials purchase orders, smaller orders||Fewer materials purchase orders, larger orders|
|Production Runs||More production runs, smaller runs||Fewer production runs, larger runs|
|Mach. Set ups||More machine set ups||Fewer machine set ups|
|Packaging||1 Unit per package||4 Units per package|
|Direct labor||More direct labor required||Less direct labor required|
|Direct materials||Higher direct materials cost||Lower direct materials cost|
|Table 1. Product A and Product B compared.|
Direct Costs Are the Same in traditional and Activity Based costing
Management must estimate the profitability of each product in order to decide which products to produce and sell and how to price them. This, in turn, requires an understanding of the full cost per unit of each product. While the direct costs per unit may be found, easily, the indirect costs are less obvious. As a result, the firm will have to uncover product indirect costs through a costing methodology—either traditional cost allocation or activity based costing.
Direct costs are the same under both traditional costing and ABC. For direct costs, accountants measure a cost per product unit for each direct cost category. The two costing methods differ, however, in the way they assign indirect costs to products. Consequently, the two costing approaches sometimes give quite different pictures of the profitability of individual products.
Explaining Traditional Costing
Example Calculations and Costing Results
In one accounting period the firm produces and sells 900,000 units of product A at $3.00 each and 2,100,000 units of product B at $2.00 each.
Traditional Costing: Finding Direct Costs
Table 2 below shows the resulting revenues and direct costs for these sales.
|Products Compared||Product A||Product B||Total|
|1. Units produced & sold||900,000||2,100,000||3,000,000|
|2. Selling price / unit||$3.00||$2.00|
|3. Direct labor cost / unit||$0.50||$0.50|
|4. Direct materials cost / unit||$0.75||$0.50|
|5. Sales revenues [ = 1 * 2 ]||$2,700,000||$4,200,000||$6,900,000|
|6. Direct labor costs [ = 1 * 3 ]||$450,000||$1,050,000||$1,500,000|
|7. Direct materials costs [ = 1 * 4 ]||$675,000||$1,050,000||$1,725,000|
|8. Total Direct costs [ = 6 + 7 ]||$1,125,000||$2,100,000||$3,225,000|
|Table 2. Sales revenues and direct costs for Products A and B|
Traditional Costing: Finding Indirect or Overhead Costs
The company's cost accountants will also find cost totals for the period's production support activities. In traditional cost accounting, these are called "overhead" or "indirect costs," as shown in Table 3 below.
|Prod. A & B Indirect||% of Total Indirect|
|Machine testing & calibration||$300,000||21.1%|
|Machine maintenance & cleaning||$287,000||20.2%|
|Table 3. Indirect cost components for Traditional costing|
Traditional Cost Accounting: Calculating Direct and Indirect Costs
The simple form of traditional cost accounting appearing here uses only the total indirect cost line from Table 3. Traditionally, firms allocate this cost total to each product, A or B, based on proportional usage of a given resource. The resource chosen for this purpose is usually one of the direct cost items. Note especially that this approach is also called production volume based (PVB) cost allocation, for obvious reasons.
Under PVB cost allocation, the total indirect cost could be allocated to Products A and B based on factors such as the proportion of total
- Production machine time used by each product.
- Direct labor costs used by each product.
- Factory floor space used by each product.
Other factors may also apply. For this example, the firm's accountants chose to allocate indirect costs referring to direct labor costs. The indirect cost total from Table 3 above is $1,422,500. The direct labor total (line 6 from Table 1) is $1,500,000. From these figures, the firm allocates indirect labor cost to each product as a percentage of the product's own direct labor cost:
Indirect labor cost / direct labor cost proportion:
= $1,422,500 / $1,500,000
= 0.948 = 94.8%
- For product A, Direct labor costs are $450,00 (Table 2, line 6). The indirect cost allocation for A is therefore 94.8% of this, or $426,750.
- For product B, Direct labor costs are $1,050,000 (Table 2, line 6). The indirect cost allocation for B is therefore 94.8% of this, or $995,750.
Traditional Costing: Allocating Indirect Costs
Table 4, below, shows how this allocation produces indirect cost estimates per unit. And, the table also shows the traditional costing solutions for gross profit and gross margin for each product unit.
|Product A||Product B||Total|
|9. Units produced and sold|
[Table 2, line 1]
|10. Total direct costs|
[Table 2, line 8]
|11. Total indirect costs|
[allocation shown above]
|12. Revenues per unit|
[Table 2, line 2 ]
|13. Direct costs / unit|
[ = 10 / 9 ]
|14. Indirect costs / unit|
[ = 11 / 9 ]
|15. Gross profit / unit|
[ = 12 − 13 − 14 ]
|16. Gross profit margin|
[ = 15 / 12 ]
| Table 4. Gross profit and gross margin calculation for each product, using|
traditional cost accounting approaches for indirect costs.
Conclusions: Traditional Cost Allocation (Product Volume Based Allocation) Example:
- Estimated Indirect cost per unit is the same for both products, $0.47 (Table 4, line 14). This must be the case, because indirect costs for both products use the same allocation rate ( 94.8%) applied to direct labor costs, based on the same direct labor rate ($0.50 / unit).
- On a per unit basis, this traditional costing finds Product A more profitable than product B: The gross margin rate of 42.5% for A compares with a gross margin of 26.3% for B.
Explaining Activity Based Costing
Example Calculations and Costing Results
This section presents an ABC version of the same product costing situation. The example shows how ABC and traditional costing can yield different indirect cost estimates for the same products. And, this means the two approaches can also estimate profitability differently. Finally, especially, however, that the example also shows clearly that ABC requires more data and more detailed analysis than the PVB allocation approach.
ABC costing for products A and B begins with the same summary table used for the traditional costing example above. Data for starting the analysis includes units produced and sold, sales revenues, and direct costs. The ABC example therefore begins with another copy of Table 2:
Direct Costs Under ABC
|Product A||Product B||Total|
|1. Units produced & sold||900,000||2,100,000||3,000,000|
|2. Selling price / unit||$3.00||$2.00|
|3. Direct labor cost / unit||$0.50||$0.50|
|4. Direct materials cost / unit||$0.75||$0.50|
|5. Sales revenues [ = 1 * 2 ]||$2,700,000||$4,200,000||$6,900,000|
|6. Direct labor costs [ = 1 * 3 ]||$450,000||$1,050,000||$1,500,000|
|7. Direct materials costs [ = 1 * 4 ]||$675,000||$1,050,000||$1,725,000|
|8. Total Direct costs [ = 6 + 7 ]||$1,125,000||$2,100,000||$3,225,000|
|Table 2 (second copy). Sales revenues and direct costs for Products A and B|
Overhead or Indirect Costs Under Activity Based Costing
In ABC, the "indirect" or "overhead" cost contributors are viewed as "activity pools."
Under activity based costing, an activity pool is the set of all activities required to complete a task, such as (a) process purchase orders, or (2) perform machine set ups.
In order to "cost" activity pools, ABC identifies activity units that are cost drivers for each pool. The total cost of for the activity pool "process purchase orders," for instance, is driven by the number of purchase orders processed, while the total cost for activity pool "perform machine set ups" is driven by the number of set ups.
Tables 5A and 5B, below show a cost driver (CD) unit cost for each activity pool: one machine set up, for instance, is found to require $1,500 in labor, materials, energy, and other resources.
Table 5A, moreover, shows the number of CD units (activity units) used for product A, while Table 5B shows these figures for product B. From the known cost of each CD unit, a total cost can be assigned for each product for each activity pool, as the rightmost columns of Tables 5A and 5B show.
In ABC, assigning cost totals to activity pools in this way, using cost driver units, is stage-1 allocation, or batch-level allocation.
Product A activity units, activity pools, and cost drivers
|Cost Driver (CD)|
|17. Purchase orders||No of purchase orders||$1,800||75||$135,000|
|18. Machine set ups||No of setups||$1,500||150||$225,000|
|19. Product packaging||No of product|
|20. Machine testing |
|No of tests||$100||1,000||$100,000|
|21. Maintenance |
|No of batch runs||$1,150||200||$230,000|
|Table 5A. ABC Stage-1 allocation (batch level allocation) for product A: Activity pools, cost drivers, cost per cost driver unit, and total cost for these activities.|
Product B activity units, activity pools, and cost drivers
|Cost Driver (CD)||CD|
|17. Purchase orders||No of purchase orders||$1,800||25||$45,000|
|18. Machine set ups||No of setups||$1,500||100||$150,000|
|19. Product |
|No of product|
|20. Machine testing |
|No of tests||$100||2,000||$200,000|
|21. Maintenance |
|No of batch runs||$1,150||50||$57,500|
Table 5B. ABC Stage-1 allocation (batch level allocation) for Product B: Activity pools, cost drivers, cost per cost driver unit, and total cost for these activities.
When each product's activity pool cost totals are known, the analysts can then calculate the cost per product unit, as Table 5C shows. To find product unit costs, the analyst divides the activity pool cost totals by the number of product units. In ABC, the process of finding product unit costs isstage-2 allocation, or product level allocation.
Stage 2 allocation in ABC: Allocating activity pools to product units
|Total Indirect Cost|
[From Table 5A]
|Cost per product unit|
|Total Indirect cost Product B|
[From Table 5B]
|Cost per product unit|
|Total indirect cost|
|17. Purchase orders||$135,000||$0.15||$45,000||$0.02||$180,000|
|18. Machine set ups||$225,000||$0.25||$150,000||$0.07||$150,000|
|19. Product packaging||$180,000||$0.20||$100,000||$0.05||$280,000|
|20. Machine testing |
|21. Maintenance |
|Table5C. Stage-2 allocation in ABC: Allocating activity pool costs to individual product units. The cost per product unit figures for product A and product B (second and fourth columns) derive d from the cost sums for each activity pool (first and third columns) divided by the number of product units produced and sold for each product (Table 2, line 1).|
The total product unit costs for each product correspond to the total indirect costs for each product from the traditional costing approach.
Finding Overhead Costs Per Unit in ABC
Table 6 below shows how these costs contribute to the new version of profitability calculations for each product.
|Product A||Product B||Total|
|22. Units produced and |
sold [Table 2, line 1]
|23. Total direct costs|
[Table 2, line 8]
|24. Total overhead costs|
[Table 5C, line 21 ]
|25. Revenues per unit|
[ Table 2, line 2 ]
| 26. Direct costs / unit|
[ = 23 / 22 ]
|27. Overhead costs / unit|
[ = 24 / 22 ]
|28. Gross profit / unit|
[ = 25 −26 − 27 ]
|29. Gross profit margin|
[ = 28 / 25 ]
|Table 6. Gross profit and gross margin calculation for each product, using activity based costing for indirect, or overhead costs.|
Conclusions: Activity Based Costing Example.
- Estimated Indirect (overhead) cost per unit is quite different for each product, unlike the traditional costing example above where indirect costs per unit were the same for both products. This approach recognizes that product A uses more activity pool resources than product B.
- On a per unit basis, ABC finds product B more profitable than product A. The gross margin rate of 36.8% for B compares with a gross margin of 26.1% for A.
Comparing ABC and Traditional Costing
Advantages and Disadvantages to Each Approach
Costing Results from Two Approaches
Table 7 below shows the per-unit profitability estimates for each product from the examples above.
Product Profitability (Gross Profit Margin)
|Product A||Product B|
|Traditional cost allocation|
(Production volume based allocation)
|Activity based costing approach||26.1%||36.8%|
|Table7. Comparison of profitability estimates from two different costing methods. Traditional costing shows product A more profitable than product B. ABC based costing shows the reverse. These differences result from the different treatment of overhead costs.|
Key Differences Between Costing Methods
The tables and examples above illustrate some key differences between the costing methods:
Data and Analysis
- Activity based costing requires detailed knowledge of the activities and resources that go into overhead (or "indirect") support work.
- Traditional cost accounting (production volume based allocation) requires only a total overhead cost and a simple allocation rule.
Overhead Components and Products: Differentiation vs. Aggregation
- ABC recognizes that individual overhead components can be distributed differently for different products. One product may consume relatively more maintenance resources, for instance, while another product may consume relatively less maintenance resources but relatively more machine set up resources.
- Traditional cost accounting typically puts overhead components into fewer categories, or even a single category, and uses a single allocation rate for all products.
Direct vs. indirect measurement
- Activity based costing treats overhead costs essentially as direct costs, in that cost estimates reflect actual cost driver usage for each product. These costs, in turn can be reasonably be apportioned to individual product units.
- In traditional cost accounting (production volume based allocation), the total overhead cost is known accurately. However, in traditional costing the distribution of that total to individual products is based on an indirect measure of that cost.
Costing Accuracy vs. the Cost of Costing
For the profitability figures shown in Table 7 above, the activity based costing results may be taken as the more accurate results—more closely reflecting the "true" production costs of products A and B—than the profitability figures from the traditional costing approach. Whether or not the improved accuracy justifies the higher cost of applying this costing method, however, is a question management will have to investigate and answer before committing to a comprehensive new approach to costing.
Explaining Activity Based Management ABM
What is the Role of ABC in ABM?
Note especially that the purpose of ABC is to provide management with information for decision support and planning. Organizations that use ABC consistently, to pursue costing accuracy, are practicing activity based management ABM.
Adoption of ABC and ABM
ABC first appeared in the mid 1980s. Since that time, the percentage of companies and other organizations using the approach has increased more or less continuously. However, as mentioned, nearly four decades after it first appeared, the majority of companies and organizations still do not use activity based costing, and do not practice activity based management.
Implementing Activity Based Management ABM
Regarding implementation, activity based costing requires detailed and complete information on specific activities that go into specific products, services, and tasks, as well as detailed and complete information on the resources consumed by these activities(including time, labor, and other goods and services). Implementation in large, complex organizations is therefore a labor-intensive and data-intensive undertaking.
Since the mid 1980s, however, ABC has become more accessible and more affordable to many companies through two ongoing trends.
- Firstly, recent improvements in costing software.
- Secondly, the increasing availability of data from complex, comprehensive software systems, such as enterprise resource planning (ERP) systems, manufacturing resource planning (MRP) systems, and customer relationship management (CRM) systems.
ABM Started in Manufacturing
When first introduced, the obvious benefits of ABC were most readily seen in product manufacturing settings, as the two numerical examples above show. From the start, it was clear that in such settings, the ABC is superior to traditional cost accounting for the purposes of:
- Identifying truly profitable and truly unprofitable products.
- Finding and eliminating unnecessary costs.
- Identifying and distinguishing between true value-add activities and non-value add activities.
- Pricing products so as to achieve acceptable margins.
Activity based management: Moving beyond manufacturing
Increasingly, however, the value of more accurate costing has become more widely appreciated, leading to the application of this methodology for the purposes of:
- Budgeting and financial planning.
Organizations can anticipate overhead costs and funding needs with greater accuracy and more certainty under ABC.
- Human capital management.
Firms can now direct human resources into more profitable activities under ABC.
- Performance measurement.
Managers can evaluate the performance of individuals, groups, projects, initiatives, and programs, with more certainty and accuracy when their true costs are better understood through ABC.
By Marty Schmidt
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