Are you Running your Business for Success

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Is your business set up for success? Can you point your company in the direction of financial success, step on the gas, and then sit back and wait to arrive at your destination?

Not quite. You can't let your business run on autopilot and expect good results. Any business owner knows you need to make numerous adjustments along the way - decisions about pricing, hiring, investments, and so on. So, how do you handle the potential business financial issues facing you?

One way is through cost accounting. Cost account is great for smaller, less complicated businesses.  COST ACCOUNTING HELPS YOU MAKE INFORMED DECISIONS. 

Cost accounting reports and determines the various costs associated with running your business. With cost accounting, you track the cost of all your business functions - raw materials, labor, inventory, and overhead, among others.

 Cost accounting allows you to understand the following:

1.   Your company cost behavior; Will the costs increase or stay the same if production of your product goes up?

2.   Appropriate prices for your goods or services; Can you raise or lower your prices based on the current market?

3.   Budgeting. You can't create an effective budget if you don't know the real costs of the line items.

To monitor your business's costs with this method, you need to pay attention to the two types of costs in any business: fixed and variable.

  • Fixed costs don't fluctuate with changes in production or sales. They include:
    • rent
    • insurance
    • dues and subscriptions
    • equipment leases
    • payment on loans
    • management salaries
    • advertising
  • Variable costs DO change with variations in production and sales. Variable costs include:
    • raw materials
    • hourly wages and commissions
    • utlities
    • inventory
    • office supplies
    • packaging, mailing and shipping costs

Cost accounting is not hard, but it will take a little bit of time to set up.  The time that you put in setting up your cost accounting system will definitely help you understand the ins and outs of your business, and help create sound guidance for internal decision-making.  Consider setting up a cost accounting system.  It can do wonders for your business!

Smooches,

Keisha