Cost accounting is a key ally for businesses that want to manage their costs better and maximise profits. For example, imagine you own a small business that produces clothing. Using cost accounting, you could determine exactly how much it costs you to produce each item of clothing. This means that you will know exactly what price to charge your customers for each product, so that you do not lose money by selling it at a too low price or discourage customers because the price is too high.
Cost accounting guides strategic choices
But cost accounting is not only limited to determining the selling price of products. It can also help companies make informed decisions about their investments and business strategies. To go deeper into the previous example, suppose a clothing company has just launched a new product line aimed at the youth market. Using cost accounting, the company could evaluate the profitability of this new line compared to its other existing product lines.
For example, it could calculate the production, marketing and distribution cost of each clothing line and compare the profits generated by each. In this way, it could identify which clothing line is the most profitable and decide whether to focus on that or to improve the new product line to make it more competitive.
Cost accounting to manage a mix of offers
Cost accounting is particularly useful for companies that offer several products or services, as it allows them to assess the profitability of each product or service. For example, a company offering consulting services could use cost accounting to determine which services are the most popular and generate the most profit.
Cost accounting for long-term analysis
In addition, cost accounting helps companies monitor their performance over time, allowing them to make changes or adjustments if necessary. It is an indispensable tool to identify the activities that generate the most profit and focus more resources on them.
In summary, cost accounting is an essential tool for companies that want to effectively manage their costs, maximise profits and make informed decisions on their investments and business strategies.
Cost accounting with So Smart
With So Smart, thanks to our Accounting App and the use of analysis dimensions, you can analyse your accounting in real time, without any problem with the general accounting, from multiple point of views and without effort.
Change the initial settings involving the following entities:
- First note registration forms
all accounting is fed automatically.
Cost accounting integrated with general accounting becomes possible and simple.
A simple chart of accounts, but many possibilities for analysis such as:
- Cost Centre
- Business Line
- Geographical Area
An example of analysis by dimension
Finally, if you are looking for a system that allows you to build a customised analysis, you can take advantage of the financial reports function to analyse various balance sheet reclassifications by combining the various analysis dimensions you have set up and also calculating your KPIs.
An example: you can produce a detailed EBITDA income statement reclassification by Business Line, which can be analysed directly in Business Central and, if you wish, exported to Excel!
An example of EBITDA analysis