The fact is that customers are the source of a much greater amount of work-creation than most people imagine. For wholesalers and distributors, one can argue that customers cause all of the work. And even once that is understood, traditional accounting systems are ill equipped to trace the costs. Traditional financial accounting systems are structurally deficient to accomplish this. Traditional accounting only reports employee-related salary and fringe benefit costs, which reveal no insights to the content of work performed, which is controllable.
Business processes are unaware of artificial organisational boundaries.
In contrast, ABC flexibly defines and measures costs at the level of work activities, regardless of function. ABC then allows re-assembly and linkage of these same work activity costs to how each customer, channel and market segment consumes the costs to get served. In complex, support-intensive organisations, there can be a substantial chain of support activities prior to and upstream from the work activities that eventually trace into the final cost objects. The direct costing of indirect costs is no longer, as it was in the past, an insurmountable problem given the entry of computerised ABC software that evolved in the early 1990s. ABC allows for intermediate direct costing to a local process output or to an internal customer or required component material that is causing the demand for work.