Managing Overhead Allocations

Overhead allocation definitions in Axiom Cost Accounting are used to define the rules and order in which to move overhead expenses from support departments (Security, IT, Utilities, etc.) to revenue-producing departments (usually In Patient departments).

Axiom Cost Accounting uses the Step Down method, which allocates costs from one department to other departments using a sequential process. When setting up the allocation sequence, we recommend allocating costs starting with the most (based on count) supported departments and working your way down to the fewest supported departments. Keep in mind that this may not always correlate to the departments with the highest cost. For example, if an overhead Administration department holds $500,000 in C-level salaries, you may want to allocate this first since Administration supports the entire system. On the other hand, a grouping of clinical support departments may hold $1 million in cost, but since they would support a more limited amount of departments (clinical only), you would allocate the cost after the Administration department.

TIP: Your Kaufman Hall Implementation Consultant can help you set up the allocation definition run order.

In Axiom Cost Accounting, you manage the allocation definitions and run order in the Allocation Definitions page. From this page, you can add, edit, and delete definitions as well as reorder the sequence of the definitions. This page also allows you to validate that definitions do not violate the rules of other definitions. For example, you may accidentally set up a definition that allocates to the same department twice. In this case, the system would display a validation error.