Not forgetting the new additions, like Joseph, which I continue to see working hard in our office ….

Also, saw the newsletter that User Conference is coming soon ….. I really enjoyed the couple of conferences that I attend in those early days …

Best Regards,
Beng Choo
7th Feb, 2012

Looking back over my 20+ years of accounting history with most of it in cost and inventory, I have never ran into a cost accounting function or manufacturing company that did not present a breakdown of operating costs to budget with detail analysis into the production variances as part of the period, quarter and fiscal financial package.
During the budgeting or planning phase, costs/ expenditures were reported according to the assignment as direct, fixed and variable with summary analysis of labor cost between management, staff, other indirect and direct as well as breakdown of depreciation by work center, and back flushing of forecast through MRP, to pull labor, machine, subcontracting and other costs. Plus the materials side with last price paid; open purchase orders with due dates, and pricing projections from Procurement. Typically, 3 months before the beginning of the new budget cycle, primary vendors were contacted to provide some indication on direction of their prices. Forecasts from Marketing on volume, phase in/out of products, projected mix and market overview or trend for next 3 years along with cost reduction programs.

It always hits me as strange when I heard others indicating the lack of cost analyst within their companies. My worst cases were coming on board at companies that lost systems knowledge resulting from poor leadership, inexperience and little or no process documentation with high personnel turnover ,or (disastrous) firing of whole accounting and cost departments for manipulation of the numbers (unusually associated with unexplainable increasing inventory levels, provision and prepaid accounts).

I think today’s challenge, new roles and responsibilities for the cost accounting/manager is what do you do when you come on board to a new company and find that their cost modules and feeder modules are not in the best shape due to high employee turnover, poorly documented process and procedures, questionable accuracy in product structures, lost knowledge because the key person left with everything in their head, so on and so forth. Their current system could be more than adequate for reliable costing, so to bring in a new system following all the parameters of world class selection, implementation, consensus, team building, employee buy in, and user training, etc. is neither practical nor cost effective. Where would you start to clean up the mess, reestablish confidence in financial/managerial reporting, and functionality maximization?
The role and responsibilities of cost accounting are in flux. Moving from setting pricing, calculation of labor, machine, the various absorption and allocation rates; capacity analysis, variances and all that other financial stuff (that’s really technical jargon), to being the systems savvy – knowledgeable in all the detailed relationships of all the various modules, knowledgeable in system’s configuration matrix, linkage between feeder systems from when raw materials purchase request is generated, receipt of purchases into receiving dock, creation of accrued liabilities and vendor detail files (accounts payable), MRB, vendor returns or replacement, stock movements, issuance, what stock movement transaction do or effect (expense, WIP, projects, CIP, internal orders), how cost move, financial transactions written, general ledger and sub system posting; valuation methodology and those interactions, subcontracting activities with all those possible transactional combinations, feeders for reporting and recording labor activities, system validation processes, associated general ledger posting generation, reconciliation between payroll and labor tracking integration, and on and on until recording of revenue, cost of goods sold, and data warehouse reporting.
Unlike the general ledger or staff accountant and manager who focus is account posting accuracy and balancing to supporting schedules – right or wrong it does matter as long as it balances. Cost Accounting has greater financial responsibility, responsibility for the cohesiveness of the system. More so than IT, because it is the Cost Accounting group who is the watchdog of the transactional interactions, stability of master data, cost validation and determination, viability of MRP structural modules. This is our new domain.
You can get a cost accountant to do the staff accountants and general ledger accounting and financial reporting functions; but it is more difficult to have them do what the cost accountant does.

When you have a chance see this awesome post….