Time-Driven Activity-Based Costing Consulting
Time-driven activity-based costing (TDABC) consulting helps companies replace volume-based overhead allocation with time equations built from operational data. The result is a cost model that shows what every product, customer and channel truly costs to serve - and keeps showing it, month after month, without armies of analysts. Cost & Profitability has built 150+ TDABC models since 2010. It is the only thing we do.
Why volume-based costing lies to you
Most companies still spread overhead by revenue, units or direct labour hours. That arithmetic was defensible when indirect costs were 10% of the total. Today they are often 40-60% - and spreading them by volume systematically flatters complex, fussy, low-volume business while punishing the simple, high-volume work that actually pays the bills.
The symptom is familiar: the P&L says 12% margin, but nobody can say which customers or products created it. Price negotiations run on gut feel. The product everyone believes is the winner is quietly subsidised by two SKUs nobody talks about.
TDABC fixes the arithmetic. Instead of asking people how they spend their time (the survey approach that sank classic ABC), it models each process as a time equation: a base time, plus increments for every complexity driver - a fragile SKU, an urgent order, a customer who pays late. Multiply time by the cost rate of the resource, and every transaction carries its true cost. Applied to orders and customers, that same arithmetic is what we walk through in how to calculate cost to serve.
When to bring in a TDABC consultant
You don't need consultants to admire the methodology - Kaplan and Anderson's book explains it well. You need them when:
- Indirect costs exceed ~30% of total and are allocated by a single volume key;
- Margin varies wildly and nobody trusts the numbers - finance and operations each keep their own spreadsheet;
- A previous ABC project died under the weight of quarterly surveys and a model only one person understood;
- Pricing decisions are imminent - contract renewals, tariff changes, a new channel - and the cost side of the equation is guesswork;
- You tried to build it internally and got stuck between "too simple to be useful" and "too detailed to maintain".
That last point is where experience earns its fee: the craft of TDABC is choosing which complexity to model. Good design beats raw detail.
How we work: five steps to a living model
- Profit Check (free, 12 to 15 minutes). A structured self-assessment that scores your cost-management maturity across 6 dimensions and tells you whether TDABC is even the right next step.
- Scoping call (free). We look at your data landscape - ERP exports, WMS, billing - and define the model boundary. You get a fixed fee before any work starts.
- Diagnostic - ProfitAudit 360 (3 weeks, fixed fee). We build a first working TDABC model on your real data: cost model, whale curve, and a margin roadmap with quantified opportunities.
- Build & Embed (4-8 weeks). The model goes live in CostCtrl, recalculating every transaction every night. Your team gets certified to own it - we design ourselves out of the loop.
- Advisory (ongoing, optional). Quarterly scenario reviews and AI-assisted margin commentary, for teams that want a sparring partner rather than a babysitter.
What an engagement looks like in practice
A mid-sized hospital group came to us convinced their problem was procurement costs. The CFO's words: "We know we lose money somewhere, we just can't see where." Three weeks of TDABC modelling on their existing system data showed that 18% of contribution margin was being destroyed by a minority of case types whose true cost - theatre time, length of stay, readmissions - had never been assigned to them. Procurement was fine. The case mix wasn't.
The pattern repeats across sectors: the loss is rarely where the organisation thinks it is, and it is almost never visible in a volume-allocated P&L.
TDABC vs. classic ABC vs. traditional costing
| Traditional (volume) | Classic ABC | TDABC | |
|---|---|---|---|
| Overhead assigned by | One volume key (units, revenue) | Activity drivers from staff surveys | Time equations from operational data |
| Captures complexity | No | Partially | Yes - per driver, per transaction |
| Cost to maintain | Trivial (and wrong) | High - surveys every quarter | Low - equations update with the data |
| Typical fate | Persists, misleads | Abandoned within 2-3 years | Survives - if designed well |
| Best for | Single-product businesses | - | Any business where complexity drives cost |
What you get
- A working model, not a report. Every engagement ends with a model your team can run - in CostCtrl or in your own stack.
- A whale curve of cumulative profitability by customer and product, with the destroyers named.
- A margin roadmap: quantified actions - reprice, redesign, release - ranked by impact.
- A certified team. We train your controllers to own the model. Dependence on consultants is a design flaw.
Frequently asked questions
How is TDABC consulting different from traditional costing consulting?
Traditional costing consulting usually ends in a one-off allocation study that is out of date the month it is delivered. TDABC consulting builds time equations into a living model that recalculates as your operational data changes - the deliverable is a system, not a slide deck.
How long does a TDABC engagement take?
The ProfitAudit 360 diagnostic takes 3 weeks at a fixed fee. A full implementation - live model, integrations, team certification - takes 4 to 8 weeks more, depending on data readiness and scope.
What data do we need to start?
Less than most teams expect: a general ledger export, transaction-level operational data (orders, deliveries, cases) and payroll by department. In Portugal and several other countries, standard ERP and accounting exports cover a large part of it. Perfect data is not a prerequisite - finding the gaps is part of the work.
What does TDABC consulting cost?
The diagnostic is a fixed fee agreed before we start, scoped in a free call - no day rates, no surprises. Implementation is quoted per scope after the diagnostic, when both sides know exactly what the model needs.
Find out where your hidden margin lives
Start with the free Profit Check - 12-15 minutes, scored across 6 dimensions, no email required until you want the report.
How to implement TDABC in your company
A TDABC implementation fails when it tries to model everything at once and succeeds when it starts narrow and proves value fast. The sequence is the same whatever the sector: get the cost per minute, get the minutes, allocate, validate, expand. The data you need is mostly already in your ERP, so the calendar is driven by decisions, not by data hunting.
| Step | What you produce | Typical time |
|---|---|---|
| 1 · Pool resource costs | Cost pools by resource group | Week 1 |
| 2 · Capacity cost rate | Cost per minute per resource | Week 1 |
| 3 · Time equations | Minutes per activity, with drivers | Weeks 2-3 |
| 4 · First allocation | Cost per order, customer, product | Week 3 |
| 5 · Validate & expand | Calibrated model, ready for decisions | Weeks 4-8 |
The single biggest predictor of success is validation: the corrections from the people who run the processes are the best calibration data you will ever get.
How much TDABC consulting costs
The honest answer is that good TDABC consulting is priced by the deliverable, not the hour, because the deliverable is well defined: an auditable cost model and the profit map it produces. That lets us quote a fixed price, so you carry no open-ended risk. Most engagements move up a short ladder, and you only climb it once each step has paid for itself.
What actually moves the price is scope, not difficulty: how many business areas, how many resource groups, how clean the transaction data, and whether you want a one-off study or an embedded monthly model. Because ERP removes weeks of financial data preparation, projects in Portugal, Spain and other ERP countries often sit at the lower end.
The Profit Check scores your readiness and points to where the margin hides.
Take the Profit Check
Can AI replace a TDABC consultant?
It is the right question to ask in 2026, and the honest answer is: AI replaces the typing, not the thinking. A TDABC project is mostly judgement wearing the disguise of arithmetic. The calculations were never the hard part; deciding what deserves a time equation, which two or three drivers actually explain the cost, and whether a surprising result is an insight or an error - that is the work, and it is exactly what a model cannot do for itself.
- Clean & reconcile ERP data
- Draft time equations from patterns
- Flag anomalies & outliers
- Refresh the model every month
- Generate first-pass charts
- Frame what to model, and why
- Choose the drivers that matter
- Validate with the people on the floor
- Judge believable vs broken
- Turn numbers into decisions
That is why the threat narrative is backwards. A consultant who refuses AI is slow and expensive; an AI without a consultant is fast and unaccountable. The valuable combination is a consultant who uses AI to compress weeks of mechanical work into days, then spends the saved time where it counts - framing, validating and deciding. That is how we already run engagements, and it is why a fixed-price ProfitAudit 360 now delivers more in three weeks than it used to.
Frequently asked questions
Can AI replace a TDABC consultant?
Frequently asked questions
TDABC vs traditional ABC - which is better?
TDABC is better for almost every company that has tried both. Traditional ABC relies on employee surveys to split time across activities, which is costly to gather, quick to go stale and hard to scale. TDABC replaces those surveys with time equations estimated from operational data, so one model can cost thousands of products and customers and refresh monthly. The one place classic ABC still fits is a small, stable operation with few activities. We compare all three methods on our TDABC vs ABC page.
How do I implement TDABC in my company?
You implement TDABC in five steps: pool resource costs, calculate a capacity cost rate per resource, build time equations for the main activities, run the first allocation, and validate it with the people who do the work. A first working model of one business area takes three to four weeks; a full rollout runs four to eight weeks more. The trick is to start narrow and let early results fund the rest. Our ProfitAudit 360 follows exactly this path.
What data do I need to build a TDABC model?
A TDABC model needs five data sources: the general ledger, payroll by department, operational transaction data, capacity estimates and complexity drivers - and most companies already have four of them in their ERP. Perfect data is not a prerequisite; the model itself shows which data is worth improving first. In ERP countries the financial layer arrives in one standardised file. Our full checklist, with what you can skip, is in the data needed for a TDABC model article.
How long does a TDABC implementation take?
A first working TDABC model of one business area takes three to four weeks; a full rollout across the company adds four to eight weeks. Our fixed-price ProfitAudit 360 delivers the first model in three weeks because data gathering runs in parallel with process mapping rather than before it. Speed comes from scope: model one area well, prove the result, then expand. A model that is 95% right and shipped beats one that is perfect on paper and never used.
How much does TDABC consulting cost?
TDABC consulting is usually priced per engagement, not per hour, and the entry point is a fixed-price diagnostic. Our ProfitAudit 360 delivers a first working model and a clear profit map in three weeks for a fixed fee; a full implementation adds four to eight weeks depending on scope. A free Profit Check comes first, so you see the likely value before committing budget. Fixed pricing exists because the deliverable - an auditable model - is well defined.
TDABC for service companies - how does it work?
In service companies, TDABC costs the time of people rather than machines, which is exactly what it was built for. You estimate the cost per minute of each team and write time equations for the main service activities - a consultation, a case, a claim, an onboarding. It is well suited to firms where labour is the main cost and complexity varies by client. Our worked example for law firms and professional services shows the method end to end.
How accurate is TDABC vs standard costing?
TDABC is more accurate than standard costing wherever work varies, because it costs each transaction by its actual characteristics instead of applying one average rate to all. Standard costing hides the cost of complexity - short runs, small orders, rush jobs - by smearing overhead evenly, which is why it makes low-volume specials look cheaper than they are. TDABC is deliberately approximate in its time estimates, but right where it matters: it is 95% right on the costs that drive decisions, not 100% right on a spreadsheet.
TDABC consultant Europe / Portugal - who?
Cost & Profitability Consulting is a TDABC specialist based in Porto, Portugal, working across Europe and beyond, with 150+ models built since 2010. We combine time-driven activity-based costing with deep use of ERP data, which gives Portuguese and Spanish clients a faster, cheaper start than almost anywhere else. Engagements begin with a fixed-price ProfitAudit 360, and a free Profit Check shows where you stand first.
