Time-Driven Activity-Based Costing projects fail for predictable reasons. After working on TDABC implementations across multiple industries, the pattern is clear: success depends on three requirements that must be addressed before the first model is built. Skip any one of them, and the project will struggle.
Requirement 1: Reliable, Accessible Data
Every TDABC model needs two fundamental inputs: resource costs (what you spend) and transactional data (what you do). Without both, the model cannot function.
The good news is that most companies already have this data. The general ledger contains resource costs, broken down by department, cost centre, or account. Transactional systems, whether ERP, CRM, or operational databases, contain records of what was produced, sold, shipped, or serviced.
The challenge is not the existence of the data but its accessibility and quality. Common issues include:
Siloed systems: Cost data lives in the accounting system while operational data lives in a different platform. Getting them to talk to each other requires extraction and mapping work that someone needs to own.
Inconsistent granularity: The general ledger might report costs by department, but operational data is recorded by production line or service type. Bridging these levels of detail requires careful design.
Missing fields: Time stamps, quantity fields, or customer identifiers may be incomplete or inconsistently captured. A TDABC model is only as good as the data feeding it.
Practical tip: Before launching a TDABC project, run a data audit. Export the key files you will need, review them for completeness, and identify gaps early. It is far better to discover data issues in week one than in week eight.
Requirement 2: Engaged People at Every Level
TDABC projects are not purely technical exercises. They require input, validation, and buy-in from people across the organisation. This is the requirement that most project teams underestimate.
You need engagement from three distinct groups:
Executive sponsors: Someone at the leadership level must champion the project. Not just approve the budget, but actively communicate why the organisation is investing in better cost data. Without visible executive support, the project will be treated as a finance department hobby rather than a strategic initiative.
Operational managers: The people who run departments, production lines, or service teams are your primary source of process knowledge. They know how long activities take, what drives complexity, and where the exceptions occur. Their input is essential for building accurate time equations. More importantly, they need to trust the model’s outputs, and that trust comes from involvement in the process.
Finance team: The controllers and analysts who will maintain the model after it is built must be involved from the start. A model that only the external consultant understands has a short lifespan.
Practical tip: Schedule a kickoff meeting that includes all three groups. Present the project objectives, explain what will be asked of each group, and set clear expectations about time commitment. People resist what they do not understand, so early transparency is critical.
Requirement 3: Methodology Knowledge
This requirement is often overlooked because it seems obvious. Of course you need to understand TDABC before implementing it. But the gap between reading about TDABC and knowing how to build a working model is wider than most people expect.
Key areas where methodology knowledge matters:
Time equation design: The core of any TDABC model is its time equations, the formulas that express how long each activity takes based on transaction characteristics. Poorly designed time equations produce inaccurate results and are difficult to maintain. Understanding how to structure these equations, when to add complexity and when to keep them simple, is a skill that comes with experience.
Resource pool definition: Deciding how to group resources (people, equipment, facilities) into pools with consistent cost rates requires judgement. Too few pools and you lose accuracy. Too many and you create unnecessary complexity.
Capacity analysis: TDABC explicitly accounts for unused capacity, which is one of its most powerful features. But correctly calculating practical capacity (as opposed to theoretical capacity) requires understanding the methodology’s assumptions.
Practical tip: If your team has not implemented TDABC before, invest in training or expert guidance before starting the build. A few days of methodology training can prevent months of rework. Look for workshops or consulting support that includes hands-on model building, not just theory.
Getting Stakeholder Buy-In
Even when all three requirements are met, projects can stall without proper stakeholder buy-in. Here are approaches that work:
Start with a pilot. Do not try to model the entire organisation at once. Pick one business unit, product line, or customer segment and deliver results quickly. A successful pilot creates momentum that no slide deck can match.
Show the “aha” moment early. Every TDABC project produces surprising findings, a product that was assumed to be profitable but is not, a customer segment with hidden costs, a process that consumes far more resources than expected. Find that story early and share it with stakeholders.
Quantify the cost of the status quo. If leadership is hesitant to invest, help them understand what decisions are being made with inaccurate data. The cost of a wrong pricing decision or a misallocated resource usually dwarfs the cost of the project.
By Miguel Guimaraes, Partner at Cost and Profitability Consulting and Co-Founder of CostCTRL
Planning a TDABC implementation? Contact us for guidance on getting started, or join one of our upcoming workshops for hands-on methodology training.