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Premium Accounting Case Study

This insurance company accounts receivable department reduced its annual costs by $350,000 with AIM-Activity Information Models  and Orient Point's unique new transformation process. 


These cost charts and graphs are from the Accounts Receivable (Premium Accounting) department of a U.S. insurance company. The first chart shows the activity cost for handling payments received within 60 days of due date.
 

 

 

 

 

                       

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

These charts were used to analyze activity cost and activity time. The department managers were surprised to discover that the most expensive activity was research. Research cost for items that are paid on time is a needless expense.

The company's internal procedures required this research activity. It seemed fine and prudent. But this policy was made without the knowledge of what it would cost. Their AIM activity based cost project discovered it's annual cost was $202,000 (4 FTE's).

The company revised their procedures and stopped conducting research on all items under 60 days. This, and 4 other simple changes, reduced costs by more than $350,000 within the first 6 months. These savings were realized through headcount reductions as people were lost through attrition.

This project was conducted over 10 weeks at a cost of $26,000.  It delivered over 160 chart and graph reports.
These data models that provide time metrics, cost, and occurrence data were prepared in 5 weeks using
Activity Information Modeling

- Staffing Model
- Process Cost Model
- Activity Cost Model
- Payment Value Model
- Age of Item Model
- Customer Segment Cost Model
- Computer System Utilization Model


Activity Based Costing 6

This chart provides the detail of all activity hours, cost and percent. The format is very useful for Activity Based Costing analysis and reporting models.
 

Activity Hours, Cost & Percent for 0-60 days items  
  Hours Cost %  
Total 54,081 $1,459,623    
Researching 7,489 $202,134 13.848%  
Book Maint 5,499 $148,409 10.168%  
Raise discrep 5,243 $141,494 9.694%  
Payment Entry 3,429 $92,556 6.341%  
Inbound call 2,720 $73,407 5.029%  
Clean up 2,404 $64,896 4.446%  
Notate Initial List 2,345 $63,300 4.337%  
AE 2,306 $62,236 4.264%  
Outbound call 2,129 $57,449 3.936%  
E-mail 1,872 $50,534 3.462%  
Other Communication 1,853 $50,002 3.426%  
Update Workstation Notes 1,518 $40,959 2.806%  
Notate 50K List 1,478 $39,895 2.733%  
Follow-up 2nd request 1,202 $32,448 2.223%  
Clean up/prep to send 1,183 $31,916 2.187%  
Reconcile 1,104 $29,788 2.041%  
Clean up/prepare to send 1,064 $28,724 1.968%  
Disbursement 946 $25,533 1.749%  
Completion of form 808 $21,809 1.494%  
Other Book Maintenance 729 $19,682 1.348%  
Review Potential Cancel List 670 $18,086 1.239%  
Other Cash Procg Stmt/DO 532 $14,362 0.984%  
Other Discrepancies 512 $13,830 0.948%  
Balance 473 $12,766 0.875%  
Follow-up 453 $12,234 0.838%  
Other Admin Tasks 434 $11,703 0.802%  
Other Cash Processg Book Cash 374 $10,107 0.692%  
Training with Buddy 363 $10,107 0.692%  
800 line calls- inbound 355 $9,575 0.656%  
Expensing 276 $7,447 0.510%  
Other A/C 237 $6,383 0.437%  
Balance A/C 221 $5,851 0.401%  
Follow-up 3rd request or more 217 $5,744 0.401%  
Other Cancellation 210 $5,559 0.401%  
Statement 179 $4,772 0.328%  
Acct Current 175 $4,665 0.328%  
Faxing/mailing 148 $3,946 0.255%  
Voice Mail 138 $3,724 0.255%  
Complete form 118 $3,680 0.219%  
Other Statement 99 $2,639 0.146%  
Update run-off date 89 $2,373 0.146%  
Filing 79 $2,106 0.146%  
Review Cancel Paid/Clear List 59 $1,596 0.109%  
Other Reinstatement 49 $1,572 0.109%  
Complete Transmittal 41 $1,093 0.109%  
Other Training 39 $1,040 0.109%  
Other Meeting 34 $1,003 0.109%  
Other initial list 31 $906 0.073%  
Complete 552 29 $773 0.036%  
Prepare documentation 23 $613 0.036%  
Escheat 20 $582 0.036%  
Posting 19 $531 0.036%  
Conference Call 16 $583 0.036%  
       

Our experience conducting ABC (activity based costing) projects with more than 500 organizations has consistently achieved similar results.

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