How to improve the power of cost data with BI

BI, or business intelligence, started out as a term that was broad and hard to define but has come to mean tools like Tableau, Qlikview, or even PowerPivot (Microsoft’s pivot tables on steroids) used to crunch big data into pretty reports or dashboards. Every industry is benefiting from these tools thanks to their ability to rapidly sift through huge sets of data from social media outlets like Facebook or Twitter using keywords and hashtags, the cloud, publicly-available sources, and proprietary corporate servers. You can drag and drop BI dashboards almost like you’re making a playlist to see exactly what you need on-the-fly. It was not that long ago that reporting meant waiting for IT to run an overnight batch. Systems would spit out reports that were static and standard with no flexibility. If you wanted something custom, you had better be prepared to wait awhile. And nevermind aesthetics back then.

For as long as Activity-based Costing has existed there has been a power struggle between complexity vs “directional accuracy”, the tradeoff in optimal cost model design required to ensure sustainability and the ability to actually use output data. Despite best efforts to keep complexity in check, costing projects consistently end up producing models with data sets much larger than the likes of Excel can handle. Without tools to easily distribute or interact with the data, often it is not leveraged to its fullest. Horror stories of months and sometimes years long projects to produce data that sits around unused are common. Meanwhile, cost management decisions that could benefit from this treasure trove of data are being made based on misleading or irrelevant existing data, heuristics, or worse: gut feel.

Why has this been happening? Because up until recently, cost modeling tools produced big data, but big data reporting tools didn’t exist.

But with today’s BI tools we can shift that frustration and difficulty with delivering ABC data to successful cost information deployment. This is where BI shines. These mountains of data can now become useful reports and dashboards that are actively used by stakeholders. The information can actually do what it was intended to do 30 years ago. That is to drive change within an organization and help manage costs in an effective way and put an end to the haphazard targeting of the largest expenses in the GL for cuts, the knee-jerk reaction hiring freezes, or less than strategic reductions in force. Keep in mind, getting the full value out of this data will require some information consumer education and an embrace of a proper cost management culture. Accessibility and interactivity improvements delivered through BI will make that task much easier than it has been in the past though.

Information must be accessible to drive wide-scale change. Partnering these two concepts of BI and ABC make that possible. Activity-based Costing had great promise when it was devised, but it wasn’t until recently in the BI lifecycle that it has become possible for cost management to reach its potential.