Time-Driven Activity-Based Costing Consulting

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 across 30+ countries 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.

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

1. Profit Check (free, 5 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.
2. Scoping call (free). We look at your data landscape – ERP, SAF-T exports, WMS, billing – and define the model boundary. You get a fixed fee before any work starts.
3. 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.
4. 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.
5. 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

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