NHS Arden CSU Output Costing
The project delivered the costing methodology and output (or Activity Based) costing models to allow Arden CSU to commercially price the services it offers its customers, and provide transparency between the activities undertaken by CSU staff on a day to day basis and the service level agreement between CSU and client NHS CCGs.
NHS Arden needed to:
- Accurately inform clients of effort against services and projects undertaken on their behalf
- Understand the cost of projects and services supplied, and how these change with activity levels and transaction volumes
- Benchmark activity, both between clients and with other organisations to drive value for money and efficiency
To address these issues the following were needed:
- A time recording and costing system aligned with outputs defined in Service Level Agreements (SLAs) and contracts with clients
- Cost modelling capability that can show “what ifs” of changing customer demand
- Monthly reporting of cost and revenue by customer and service line
- Monthly reporting of unit costs for services with volumetric cost drivers Project challenges
The project needed to re-think how costing should work in a CSU environment:
- The CSU is a complex business with multiple dissimilar service lines and significant cross-functional working
- The CSU undertakes 3 distinct types of activity each requiring a different costing approach
- There is a need to cost SLA where the outputs are not well quantified and where there is a disconnect between activity and price
- Existing costing tools were designed for annual costing based on budgeted costs, activities and volumetrics, however the environment changes too quickly for an annual model
- A monthly costing tool needs to draw activity data directly from time recording. There was no common activity dictionary between time recording and costing and time recording needed to be re-implemented to overcome this.
- Additionally the time recording system was unable to record activity by project and required upgrade to do this
The project delivered the information to negotiate the extension of SLA along with the ability to undertake what if analysis to assess the impact of potential changes in service levels requested by customers.
Reporting by service and customer of cost and revenue is now achievable on a timely basis each month so that timely action can be taken to improve effectiveness and efficiency.
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