Manufacturing Cost Accounting and Analysis
Fully grasp the manufacturing costs underlying your business. Silicon Valley’s lost art of cost accounting is alive and well with RoseRyan’s finance pros.
What is Cost Accounting?
If knowledge is power, then there is always a high incentive to dig into the many layers of information underlying your manufacturing company’s products. Experts in cost management accounting can bring this hidden information to light so that you can discern your fixed vs. variable costs, drill down to know the exact cost of each unit your company produces, make better informed decisions around pricing, and take steps to improve efficiencies and profitability.
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How much does your product truly cost? What are the margins of each product line? Manufacturing operations make up a large part of the business, but the key drivers and metrics of manufacturing companies do not rise to the surface if the company is missing out on access to the level of talent and skill required for cost and management accounting. These capabilities have become somewhat of a lost art as the level of manufacturing in the United States has waned over time.
Cost accounting experts will break down the many layers—including the cost of labor involved, the materials you use, and the leasing costs of the equipment and facilities—to provide actionable information to management.
By collaborating with finance and accounting experts who understand manufacturing financial issues and cost accounting, you can benefit from key metrics that will help you make better, more comprehensive, fully informed decisions. This data can be useful as you plan budgets, explore your options for controlling costs, negotiate pricing with suppliers, and calculate the financial impacts if you were to add or detract from your product offerings.
Cost Accounting for Manufacturers
If you would like to improve profitability, better understand the drivers of business performance, and identify cost savings opportunities, then you need to get a handle on your manufacturing costs.
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What’s holding back profits? Are your product margins thinner than you think? The metrics your manufacturing company may be following until now may not be telling you the full story. Cost accountants will determine the total cost your company incurs throughout the production process. You’ll understand in detail the cost behind each unit your manufacturer produces. How much is delivery costing you? How about material handling? The cost of selling? This detailed work can even reveal how profitable each member of your team is and whether you have the opportunity to make adjustments that could lower some of your variable costs. For example, are some customers costing you (in terms of returns and time) more than others?
Cost accountants can lay out the highest performing products and the lowest—and then help you sort through potential improvements to each area and their likely impacts to the business. Robust manufacturing business metrics can reveal where the risks from single-source vendors lie; pinpoint which products are generating the highest margins (and the lowest); and which of your locations are most profitable; among other valuable data points.
All of this cost management accounting information can feed your understanding of profitability by product line and lead to changes on where to focus the company’s energies for making improvements, including increased gross margins. Your cost accounting experts can help you explore the many options and their consequences.
Manufacturing Accounting FAQs
What are the cost accounting standards?
Unlike accounting used for financial statements that are shared externally, cost accounting information is produced for internal use, by management, so it does not have to follow a standard set of prescribed guidelines.
Develop a Cost Accounting Structure
Outsourced cost accounting experts can provide complete design and implementation of a cost accounting structure or review your current cost accounting structure for potential improvements and efficiencies. They can manage your cost accounting on an interim basis and then train incoming staff and support the transition for on-staff cost accountants when the time comes. This cost accounting structure can include operational controls around purchasing and the maintaining of the company’s inventory. Ongoing strategic insights and business assessments provided to management will lead to better decision-making.
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With the benefit of experts in cost accounting systems, you could identify your nonprofitable customers and find out why. Perhaps your delivery methods need to change or your pricing structure needs adjusting. Some customers may be weighing the company down with constant credit demands, outdated contract terms, or their delivery costs are a clear outlier compared to other customers. Pricing negotiations could be the next step. Cost accounting experts reveal critical information that you would otherwise not be aware of yet could have a significant impact on your bottom line.
Where to Find Manufacturing Finance Support
Ready to become a part of the team and understand the unique circumstances of every company they help, RoseRyan consultants who are masterful at cost accounting pay close attention to detail while also considering the big-picture view. They know where to find the answers and will deftly make inquiries across the organization, whether they need information from the supply chain group or want a better understanding of the sales process. They uncover the gaps and inefficiencies as they pore over physical inventory counts, account reconciliations, journal entries and more.
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Is there an opportunity for different functions to work more collaboratively? Could processes be streamlined and thus result in tighter, clearer information for everyone? Along every step, the interim cost accountant can keep track of what needs to get done so that an incoming, on-staff cost accountant can pick it up with minimal disruption. This expert can also help to define the role so that your company will get the most out of a cost accounting full-timer, if that is what the role calls for.
When you need specialized interim finance and accounting expertise, it’s recommended to look not just for experts who have a particular niche but who are flexible and will carry over their knowledge to your unique business. You will want a consulting firm with steep experience helping companies with their cost accounting function, tailored to the company’s exact needs, with an eye toward the future. At RoseRyan, our tailored advisory expertise can tackle your current issues while factoring in what’s best for the company going forward.
Let’s Talk
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On demand leadership and consulting services out of Silicon Valley specializing in the Finance & Accounting disciplines.