Time Driven Activity Based Costing (TDABC)

Transcription

1 Time Driven Activity Based Costing (TDABC) NCCI Annual Conference Presentation Presented by Tomika Coates, CCP July 19,

2 Learning Objectives Understand how to use TDABC to create greater transparency around activity cost Observe the critical steps to create a (TDABC) model Calculate the cost of poor quality associated with inefficiency Illustrate the value of lean thinking and continuous improvement 2

3 The Case for Change Issues Impacting Higher Education Institutions (HEIs) Pressure to Improve Student Outcomes Flattening Revenue Streams Rising Debt Burden On Students and Families Increased Competition For Students Perception of Higher Ed s Declining Value 3

4 Emerging Trends Administrative Cost at HEIs Support and administrative costs have grown faster than the cost of instruction across most campuses In no other industry would overhead costs be allowed to grow at this rate Denneen, Jeff and Dretler, Tom (2012, July 6). The Financially Sustainable University Bain Brief retrieved from 4

5 Call To Action Increasing Fiscal Accountability for HEIs Determine True Cost of Education Align Budget Model and Strategic Outcomes Prioritize Spending Monitor Resource Utilization Create Fiscal Transparency 5

6 Transforming Administration UCR R Shared Service Center s Integrated Strategy People Liberate Structures Empower Staff Build Culture Embrace Scientific Thinking Coach for Improvement Processes Map Processes Measure Performance Remove Waste Improve The Work Sustain Results Resources Determine Cost of Capacity Estimate Unit Time Calculate Activity Cost Identify Cost Poor Quality Quantify Value of Lean Clients Understand Needs Foster Engagement Establish Agreements Deliver Value Exceed Expectations BECOMING THE BENCHMARK IN SHARED SERVICE DELIVERY 6

7 The ABC Difference Traditional vs Activity Based Costing Traditional Costing Activity Based Costing Revenues and expenses aggregated at the unit or functional level (ex. HR Department) Revenues and expenses aggregated by the activities being performed (ex. Onboarding) 7

8 Time Driven ABC A Simpler Approach to Costing Activities Easy To Implement Identifies Resource Allocation Reveals Unused Capacity Calculates True Cost Flexible & Easy To Modify 8

9 Lean & Time Driven ABC Complimentary Improvement Methodologies Process Focused Value of Improvement Data Driven Impact of Waste Fact Based Promotes Accountability 9

10 Methodology TDABC Formula Capacity Cost Practical Capacity Cost Rate Unit Time Volume Activities Activity Cost $457, ,663 Annual Minutes ~$1.05 Per Minute ~1.38 Minutes 314,892 Transactions $457,465 All staff salaries, benefits, equipment, supplies, and other non salary expenses The time staff are available to complete service activities The per minute cost of supplying capacity to complete service activities The average process time to complete a service activity The total quantity of activities The total cost of performing services Example provided is for illustration purposes only Cost rate has been rounded. Exact calculation = $ Unit time has been rounded. Exact calculation =

11 Practical Capacity Identify Available Capacity Time Available Holidays (Average) Paid Time Off (Average) Sick Days (Average) Training/Meetings Huddles/On The Job Training Practical Capacity (per FTE): Capacity Assumptions Per FTE Days Hours Minutes 260 2, ,800 Total Annual Time Employed ,240 Deduct Time Not Available To Serve ,680 Deduct Time Not Available To Serve ,760 Deduct Time Not Available To Serve Deduct Time Not Available To Serve Don't Deduct Hours Work Is Performed 219 1, ,120 11

12 Capacity Cost Calculate The Cost To Supply Capacity Budget Category Total Expense Total Expense (FTEs) Operating Expense Assumptions Practical Capacity (FTEs) Practical Capacity (105,120 Minutes Per FTE) Descriptions Salaries 294, ,663 All Staff Benefits 142, Health & Welfare Other OPEX 20, Travel, Supplies, Equipment, Printing, IT, & Communications 457, ,663 Total Expense Practical Capacity $ 457,465 $1.050 = 435,663 Cost Rate Per Minute Example provided is for illustration purposes only Practical capacity FTE has been rounded. Exact FTE is

13 Unit or Process Time Evaluate The Time To Complete Activities TIME and ATTENDANCE PROCESS Activities Unit of Measurement Process Time (Minutes) Step 1. Review & Push Timesheets Per Timesheet 1 Step 2. Calculate Specialty Pay Per Timesheet 5 Step 3. Validate Payroll Roster Per Timesheet 1 Step 4. Complete Check Write Audit Per Timesheet 2 Step 5. Follow-up Unapproved Time Per Department 5 Step 6. Maintain Timeclock Assignments Per Employee 3 Step 7. Maintain Supervisor Assignments Per Student 2 13

14 Transactional Volume Estimate Total Activity Steps Activities TIME and ATTENDANCE PROCESS Unit of Measurement Process Time (Minutes) Total Volume Total Process Time Step 1. Review & Push Timesheets Per Timesheet 1 101, ,581 Step 2. Calculate Specialty Pay Per Timesheet 5 2,340 11,700 Step 3. Validate Payroll Roster Per Timesheet 1 103, ,921 Step 4. Complete Check Write Audit Per Timesheet 2 103, ,842 Step 5. Follow-up Unapproved Time Per Department 5 1,347 6,735 Step 6. Maintain Timeclock Assignments Per Employee Step 7. Maintain Supervisor Assignments Per Student 2 1,462 2,924 TOTALS , ,663 14

15 Total Activity Cost Determine Cost & Demand On Capacity Activities TIME and ATTENDANCE PROCESS Unit of Total Measurement Volume Process Time (Minutes) Total Process Time Cost Rate Per Minute Total Activity Cost Capacity Used (FTE) Step 1. Review & Push Timesheets Per Timesheet 1 101, ,581 $ $ 106, Step 2. Calculate Specialty Pay Per Timesheet 5 2,340 11,700 $ $ 12, Step 3. Validate Payroll Roster Per Timesheet 1 103, ,921 $ $ 109, Step 4. Complete Check Write Audit Per Timesheet 2 103, ,842 $ $ 218, Step 5. Follow-up Unapproved Time Per Department 5 1,347 6,735 $ $ 7, Step 6. Maintain Timeclock Assignments Per Employee $ $ 1, Step 7. Maintain Supervisor Assignments Per Student 2 1,462 2,924 $ $ 3, Totals , ,663 $ $ 457, Total Capacity Used 4.14 Total Capacity Supplied 0.00 Total Capacity Available 15

16 Practice Develop a TDABC Model REVIEW CALCUATE PROPOSE SHARE The Case TDABC Cost Improvements Observations 16

17 Communication The Value of TDABC Features (The Facts or Characteristics) Advantages (What The Features Do) Benefits (The Value To Your Campus) What Is TDABC? How Does TDABC Work? How Can TDABC Benefit Your Initiatives? 17

18 Reflections Observations and Lessons Learned Link ABC To Strategic Objectives Evaluate Cost & Benefits (ROI) Align TDABC, With Continuous Improvement Engage Operational Experts Obtain Stakeholder Buy In Manage Cultural Impacts Start Small (Simplicity) 18

19 Questions 19

20 Presenter Tomika Coates, CCP Director of Shared Services R Shared Services Center University of California, Riverside tomika.coates@ucr.edu 20