Having control of your costs at all times is paramount in any business and can give you the edge over your competitors. The ability to make decisions accurately and quickly based on real time information can make all the difference in business so it’s important to make sure you have everything in place from your workforce being properly trained to the accounting software you choose to control and produce your management accounts and ultimately control your business information.
What does Cost Accounting involve?
The purpose of Cost Accounting is to capture and isolate the costs relating to a specific product in order for you to measure the profitability and feasibility of the process. Ensuring that the correct amounts are reported on the financial statements, and in doing so assist the management in vital decision making and planning process in order to control the company moving forward.
Capturing the information
The complexity of your business will determine the type of accounting software required to the extent that a bespoke system may well need to be invested in. Monitoring the revenue, costs, variable and fixed can be a time consuming exercise. There are a lot of programs available offering stand alone platforms to fully integrated. Having the ability to run reports in real time is now seen as a must in order to achieve a better understanding on how your company is performing. Cloud accounting platforms that fully integrate not only give you real time reporting but have the added bonus of access anywhere and anytime.
Direct costs in Indirect costs
Direct costs are costs that relate directly to the production of the item you’re selling, this could be the product itself, the materials used to manufacture the item along with the labour used to build/create the product.
Indirect costs are more tangible but, nevertheless just as important. These could be warehouse costs, distribution, packaging, training your staff which can add up to a significant amount and need to incorporated. These can be applied as a percentage rather than individual amounts and applied to the overall cost of creating your product.
Choosing the right platform for your business
Making the right decision can take time and it’s important that the decision you make is the right one for your business. Having the ability to test a system on every aspect of your company, ease of use, are you able to create your own codes, install your own chart of accounts, have multiple users and tailor their access, run the reports you need and extract all information in order to build bespoke reports should you need to, all this and have the help and support from your software provider are all areas that need to be invested in before you make your decision.