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Profitability management and cost optimization

Goals and objectives

Activity Based Costing/Management (ABC/M) is a tool that helps to explore opportunities for improving profitability of a company. Unlike traditional cost analysis approaches, ABC/M provides more accurate cost information for each activity, client and product. Using activity-based approaches can help to overcome the following business challenges:

  • Improving sales strategy based on a profitability analysis of various cost objects (clients, products, services, regions and sales channels)
  • Planning and controlling how resources are used, identifying wasteful expenditure, and exploring opportunities for cost reduction without affecting core operations
  • Establishing cost of internal functions and considering options for optimizing them, including centralization or outsourcing
  • Differentiating levels of service offered to clients

Our services

Deloitte CIS offers a full range of services for developing comprehensive ABC/M-based solutions for profitability management, including methodological framework development and a specialized information system implementation.

We are also glad to offer our experience in developing cost management methodologies and models for companies in all industries, including banking, telecommunications, and oil and gas.

We help our clients with the processes of optimizing cost management, analyzing profitability and forming reports for regulatory authorities (separate accounting for each type of business activity and regulated service).

Our professionals implement methodologies and models worked out for use in industrial information systems such as SAP PCM, Hyperion, SAS, and ABM. They provide the support required and help to establish connections between ABC models and client’s accounting systems.

Our approach

Depending on a company’s business and its previous levels of financial/management accounting and planning functions, a project can include separate АВС/M components or involve development and implementation of an integrated solution. Deloitte CIS consultants are experienced in developing АВС/M systems at all levels, from performing a diagnostics of the existing system and developing the activity-based costing concept to supporting the implementation of automated solutions for transaction accounting, data processing and reporting.

We assist our clients in forming a management reporting package that contains process-related performance indicators based on an ABC/M model. We help our clients to integrate ABC/M system into their existing practices of resource-intensive process management, allowing the company to use the ABC/M system as both a reporting tool and a business management tool.


Project result is an integrated cost and profitability management system based upon ABC/M model which consists of the following components:

  • Management accounting forms for cost of resources and processes analysis, services and other cost objects profitability analysis;
  • ABC/M methodology including lists of resources, processes, cost objects, allocation bases, income/expense allocation principles;
  • ABC/M model, either Excel-based or implemented in a specialized information system;
  • RAS/IFRS accounting policy, chart of accounts, journals and instructions enhanced to support ABC/M methodology;
  • Procedures for maintaining and updating information kept in ABC/M model;
  • Staff trained to operate the model and prepare management information on analysis of cost of resources, processes and services.
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