Tag Archives: Rich LaSalle
When we approach companies to discuss the value of implementing an enterprise cost solution like ImpactECS, we are often asked to describe the difference between our solution and a traditional ERP system. In this three-part article, we’ll discuss the ways that enterprise costing can enhance your ERP system and put your company on the path to better costing.
First up – rate building.
We talk to controllers and cost accountants every day and it never fails that when we ask how they calculate rates, they inevitably respond that they use their ERP system. We’re always curious how they accomplish this task because we’ve never seen it done before. And that’s when the truth comes out. They’re calculating the rates in a spreadsheet and inputting the information into their ERP system.
To calculate an overhead rate, you need two things – a pool of indirect costs and an allocation method, or driver. In complex environments you can have hundreds of rates. And while the math is not complicated, pulling together all of the components can be a cumbersome task.
So what’s so special about calculating rates using an enterprise cost system like ImpactECS?
I’m glad you asked! With ImpactECS, whenever you change a factor or driver used in a rate calculation, you can automatically restate the costs, inventory values, budgets, or variances connected to the rate. For example, if you increased the machine efficiency rate on a particular production line, you would immediately see the reduced cost per unit of the products manufactured on that line without having to manually intervene.
That’s great, but I still need the rates in my ERP system!
Never fear! By connecting ImpactECS with your ERP system, you can continue to upload rates as you’ve done in the past to perform other transactional processes that depend on these rates.
Stay tuned for Part 2 where we’ll talk about the integration of disparate systems with ImpactECS.