Smart business leaders have their finger on the pulse of their companies – the financials.
They know how much they’re spending, and how much they’re making. That knowledge is critical for adapting to changing market conditions, identifying inefficiencies, spotting wasteful processes, and much more.
Those business leaders in years gone by would depend on their small army in the accounting department to churn out reports annually, bi-annually, or even monthly. In today’s modern enterprise, ERP software standardizes and streamlines these processes, giving decision-makers accurate data in near real time.
One important area of financial analysis is cost accounting, which helps you keep tight control over expenditures and strongly affects the company’s financials, operating costs, and resource allocation, and it works in tandem with lean accounting principles.
In this article, we’ll delve into the benefits of cost accounting and examine how the ERP software can revolutionize the way businesses handle project costs, revenues, and budgets.
Cost Accounting Benefits
Cost accounting is a strategic tool that can provide numerous benefits. Here are six key advantages:
- Accurately Determine Costs. Ascertaining and tracking fixed and variable costs leads to a better understanding of your company’s operations. Cost accounting should be applied to processes, products, projects, and contracts – every aspect of your business. This will depend on other related activities: job costing, standard costing, and process costing.
- Cost Efficiency. Once you have data on your current costs, you can get to work identifying ways to reduce spending and eliminate waste – be it in money, time, or other areas. If you produce at the same levels, but reduce spending, you naturally increase profits.
- Effective Budget Planning. Cost accounting forms the basis for every well-prepared budget. Costs collected from all departments within the organization are used to set spending limits. They are also used in reporting so managers can see how much is actually being spent in each division, leading to adjustments to put priority on the most important aspects of the business.
- Data-Driven Decisions. Precise costing provides necessary data for cost-volume-profit analysis and other evaluations such as investment appraisals, production levels, and product profitability. Armed with accurate data, decision-makers will more easily adjust course for maximum benefit to the company.
- Profitable Pricing. When determining product pricing, many variables must be taken into account, such as demand for your product, supply levels, current market conditions, and what your competition is offering. Cost accounting gives you yet another dimension, helping you accurately determine profit margins to stay in the black.
- Departmental Accountability. Cost data helps managers set financial targets and milestones for each department, helping them to keep spending within the defined limits while meeting sales and productivity goals. Tighter control at the department level is the basis for company-wide success.
How ERP Software Can Help
Collecting accurate cost data across your organization is a tedious and never-ending task when done manually. This is where ERP solutions shine: They automatically perform many of the calculations for you, allowing your finance team to focus on more important activities.
Acumatica Cloud ERP is designed to fill those needs, and much more, to make your business more efficient and maximize profits. It simplifies the balancing of fixed and variable costs to help you make business decisions with confidence. As it has built-in cost tracking, Acumatica gives you a centralized solution to manage inventory, resources, and materials, giving you accurate and up-to-the-minute data on the health and performance of your business.
Would you like to see how Acumatica can increase efficiency and productivity in your business?
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Our experts will help you determine the right solution for your needs. With over 500 successful implementations, 20+ tenure of our clients and 100’s of customizations, our team can help get you to where you want to be.
