Integrated and predictive costing: from accurate history to better decisions.

By Stage 3 you know what things truly cost. Stage 4 asks a harder, more valuable question: what should we do about it, before the period happens rather than after. The accurate cost model becomes the engine for forward decisions. Budgets are built from the capacity and activity the plan actually requires, an approach often called activity-based budgeting, which is really time-driven costing run in reverse. Pricing is tested against true cost before it is quoted. Capacity is planned against the cost of having too much or too little.

This is also where costing meets strategy execution. A balanced scorecard or a strategy map describes where the organization intends to go; a Stage 4 cost model tells you what each move will cost and earn, and whether the capacity exists to deliver it. The link runs both ways, which is the whole point of the predictive path Cokins describes: costing that supports planning and decision-making, not only reporting.

What it unlocks

An illustrative example. A distributor with a Stage 3 model adds scenario capability. Before renegotiating with a major account, it models three outcomes: hold terms, raise the price of the high-cost services the account consumes, or shift the account to a lower-touch channel. The model shows the margin and capacity effect of each, including what freed-up capacity could earn elsewhere. The decision stops being a negotiation by feel and becomes a choice between quantified options. Illustrative; mechanism follows standard TDABC scenario logic.