Cost Allocation & ABC
Allocate shared costs with real transparency
Recharging group costs is where TP policy meets accounting reality, and it is often the point where good intentions fall apart in practice. This module builds a defensible, activity-based allocation model that your finance team can operate month after month and that your auditors can follow without needing a lengthy explanation.
What the module gives you
Activity-based cost pools
Costs are grouped by activity, such as finance, IT, HR, product, or marketing, rather than by cost centre, so allocations reflect what people actually do across the business. This activity-based view avoids the distortions that arise when historic organisational structures are used as a proxy for genuine cost drivers.
Multi-step allocation waterfall
Costs flow from cost centre to activity to beneficiary entity through a series of defensible allocation keys, including headcount, revenue, transaction volumes, or custom drivers agreed with your team. Each step in the waterfall is visible and adjustable, so the logic behind every recharge can be explained and defended.
Full transparency
Every cost line is traceable from its origin in the ERP through to the entity that ultimately bears it, with no black-box waterfalls hiding the mechanics along the way. This end-to-end visibility gives finance and tax teams confidence when explaining recharges to management, auditors, or tax authorities during a review.
Change-friendly
Adding an entity, changing a driver, or rebalancing a pool no longer means rebuilding a spreadsheet from scratch, because the tool recalculates every allocation in seconds. This makes it straightforward to keep the model current as the group restructures, acquires businesses, or introduces new shared services.
Use cases
When to use it
Setting up group cost recharge policies
Documenting cost allocations for TP compliance
Preparing management-service invoices
Recharging shared services in post-M&A integrations
Get your cost allocation right
Book a demo to see how activity-based allocation runs on your own cost base, using your actual cost centres, activities, and entity structure rather than a generic example. You will see the full waterfall from source cost to final recharge, and how quickly the model adapts when drivers or entities change over time.
Frequently asked
Cost allocation FAQ
What is activity-based costing (ABC)?+
Activity-based costing allocates indirect costs based on the activities that actually drive them, rather than relying on a blanket key such as revenue or headcount across the board. It gives a more accurate picture of what each entity truly consumes, which supports stronger transfer pricing documentation and internal reporting.
How are allocation keys chosen?+
Allocation keys are chosen together with your team by looking at the underlying activity and picking the driver that reflects it most closely. Common examples include full-time equivalents for HR, support tickets for IT, and transaction counts for finance shared services, each tailored to how the activity is actually consumed.
Is the output audit-ready?+
Yes, every allocation produced by the tool is documented with its driver, source data, and calculation steps, giving a complete and traceable record of how each figure was reached. This documentation is designed to support both internal management reporting and external review by tax authorities or statutory auditors.