TDABC for shared services: one cost rate, a time equation per transaction, no timesheets.
A shared services centre is almost the ideal place to use time-driven costing. The work is transactional and repeatable, an invoice processed, a hire onboarded, a ticket resolved, so it maps cleanly onto time equations. TDABC needs only two things: a capacity cost rate for each resource group, and a time equation that says how long each transaction takes, including its exceptions. From those two parameters the centre gets a defensible cost per invoice, per onboarding and per ticket, the foundation for both chargeback and cost to serve.
Cost and Profitability Consulting · 150+ models since 2010 · TDABC
TDABC for shared services uses a capacity cost rate per resource group and a time equation per transaction, an invoice, a hire, a ticket, that captures the base handling time plus the extra time exceptions add. It assigns cost by actual time consumed rather than by headcount or revenue averages, so each business unit shows its real cost to serve and the centre gets a defensible cost per transaction without surveys or timesheets.
The driver is handling time, not headcount.
Spreading the centre's cost by FTEs or by unit size over-costs simple, high-volume work and under-costs complex, exception-heavy work. The real driver is the time each transaction takes, and time is exactly what a headcount allocation throws away.
Headcount allocation buries the driver
Spreading cost by FTEs over-costs simple, high-volume work and under-costs complex work. The driver is handling time, not headcount.
Exceptions are where the cost lives
A standard invoice may take a couple of minutes; the same invoice with a mismatch, a missing PO or a query can take many times longer. Ignore exceptions and the cost per transaction is badly misstated.
Idle and standby capacity gets hidden
A centre sized for peak runs below practical capacity much of the time. A fully-absorbed rate buries that unused-capacity cost; TDABC reports it as a management signal.
Surveys do not scale and go stale
Traditional ABC needs repeated interviews to stay current. A centre processing millions of transactions needs a model that updates with volume, which is exactly what time equations do.
COST PER TRANSACTION: BASE + EXCEPTION
Illustrative. For an invoice, an onboarding and a ticket, the exception time stacked on top of the base time is where the real cost variation lives.
A capacity cost rate, then a time equation per transaction.
First the capacity cost rate per resource group; then a time equation per transaction with the exception load made explicit. Multiply each by the capacity cost rate to get a cost per transaction, then by each unit's volume to get cost to serve and a fair chargeback. Unused practical capacity is reported, not absorbed into the rate.
Capacity cost rate = cost of the resource group per period
/ practical capacity (minutes available)
Invoice processing = 3 min base
+ 9 min if exception (mismatch, missing PO, query)
+ 2 min if manual coding required
Employee onboarding = 45 min base
+ 15 min per extra system / access grant
+ 20 min if non-standard contract
Service ticket = 8 min base (tier 1)
+ 25 min if escalated to tier 2
+ 5 min per reopen
Illustrative. The exception terms carry most of the cost variation; unused practical capacity is reported, not smeared into the rate.
In the exception rate, not the headline volume.
As an illustrative pattern, a finance shared services team found that two streams of similar transaction volume had very different true costs because one ran a low exception rate and the other a high one. The base time looked identical; the exception time, which the old headcount model never separated, was the entire difference. Only the time equation made it visible.
For the full method and how it differs from traditional ABC, see TDABC vs ABC.
Frequently asked questions
- What is TDABC for shared services?
- Time-driven activity-based costing applied to a shared services centre: a capacity cost rate per resource group plus a time equation per transaction, invoice, onboarding, ticket, giving a defensible cost per transaction and per business unit.
- How do you cost an invoice in a shared services centre?
- Build a capacity cost rate for the processing team, then a time equation, base handling time plus the extra time exceptions add, and multiply. The exception load is usually the largest source of cost variation.
- How is TDABC different from ABC in shared services?
- Traditional ABC needs activity surveys and many cost-driver allocations. TDABC needs only a capacity rate and time equations, so it scales across millions of transactions and updates automatically as volumes change.
- Why do time equations matter for shared services cost?
- Because they separate base handling from exception handling. Two streams of equal volume can have very different costs, and only the time equation, with its exception terms, exposes that.
Get a cost per transaction that survives the volume.
The Profit Check takes five minutes and no data upload. It shows where a TDABC model would change the numbers behind your chargeback and your cost to serve.