10 Must-Ask Questions to Answer Before Starting Your Journey to Activity Based Costing
Before embarking on a digital costing transformation project, we believe a CFO, CEO or Finance leader should rigorously assess their organisation's readiness, strategy, and ability to sustain change.
Here are 10 must-ask questions to guide you and your teams on the journey towards Activity Based Costing (ABC) and broader digital finance reform.
1. Are Your Existing Systems and Data Structures Fit for Purpose?
Is your ERP (e.g. Oracle Fusion, SAP, Meditech, Infor) ready to support robust ABC, with cost centre mappings, payroll categorisation, capital accounting, and adequate integration between financial and clinical systems? Gaps here can derail project success before implementation even begins.
We normally start with a System Readiness Assessment to clarify your ERP capabilities and a review of your clinical and financial data alignment.
2. Do You Have High-Quality, Granular Patient Data Available?
Can you currently track patient-level activities, revenue, transfers, procedures, and resource use across all departments with the necessary detail and reliability? ABC depends on linking cost and activity at the granular level for clarity and actionable insights.
As part of an initial assessment, we’ll assess the quality of available data and create a plan to streamline it, so costs have nowhere to hide.
3. How Well-Aligned Is Your Clinical and Financial Data?
Are your data structures consistent across clinical and finance teams, allowing seamless attribution of costs to activities, departments, or DRGs? This alignment underpins every successful costing transformation.
4. What Are Your Current Overhead Allocation Methods (and are they sufficient)?
Do you have robust data for overhead drivers, such as FTE by cost centre, floor space, asset registers, and IT assets, and can these be accurately mapped within your costing system?
5. Is Your Organisation’s Governance Structure Ready to Manage Change?
Do you currently have effective steering committees, data owners, and clinical-financial alignment teams to drive, oversee, and sustain reforms? Strong governance is non-negotiable for success.
CBS - Health Costing Experts have a wealth of experience in assessing people and organisational structures, can identify gaps and introduce global best practice. Our team includes former hospital CEOs, CFOs and chartered accountants.
6. Do Your Teams Have the Skill and Capacity Needed for ABC Implementation?
What’s the current level of understanding of ABC among your finance, operations, and clinical staff? Are workloads and priorities aligned, and do your employees have the bandwidth and competencies essential to support new costing models and ongoing data stewardship?
CBS - Health Costing Experts know what it’s like to do your team’s jobs because we’ve done them, and we’re uniquely qualified to help with specialised health sector accounting and management experience.
7. Have You Assessed Your Change Readiness and Cultural Fit?
Is the leadership team supportive, and are stakeholders engaged and prepared to adopt new costing methodologies, workflows, and decision-making frameworks? Transformation isn’t just technical - it’s behavioural and strategic.
8. Have You Benchmarked Against Similar Organisations?
What solutions, vendors, and methodologies are high-performing health systems using regionally and globally? An assessment should include comparative market and implementation benchmarking to help avoid costly missteps and identify best-fit pathways.
9. Do You Have a Dual-Track Implementation Plan for Quick Wins and Long-Term Success?
Which short-term, low-risk actions can deliver immediate value and momentum, and what long-term initiatives require deeper transformation and investment? Both streams can be tightly aligned with your organisation's overall strategy.
10. Is There a Clear, Evidence-Based Roadmap with Milestones, Ownership, and Accountabilities?
Is your project plan practical, comprehensive, and actionable, with defined phases, dependencies, resource needs, risks, and integration points with the wider financial transformation agenda?
