The business world has undergone massive change in recent decades. International markets lead companies to global value added stages in production, research and development, sales and logistics, but also in administrative areas. Since the 1960s, cost accounting has been an effective controlling instrument to map the increasingly globally organized business units and functions and to make consistent group goals controllable.
The goal of effective cost accounting is full transparency regarding the efficiency of value added in the company and the success of the different business units in the various market segments, as well as support for the pricing approach.
Cost Accounting as an Effective Controlling Instrument
Heterogeneous controlling structures mean that cost or profitability accounting within a company or between Group units is often difficult to compare. In our opinion, the following measures and conditions must be observed when implementing effective cost accounting.
Effective Cost Unit Accounting Creates Additional Controlling Views
The derivation of a cost center plan must be closely tied to the corporate responsibilities. The development of a consistent profit and loss statement for individual profit centers, business units, product groups, and segment views must be integrated with the corporate strategy and the controlling views derived from it. Depending on the individual situation at the company, it is advisable to set up contribution margin accounting or to implement a full cost approach for the controlling.
Efficient Cost Type Accounting Reduces the Workload for Accounting and Creates Comparability
Cost type accounting is usually represented in the chart of accounts. Here, it is necessary to weigh the granularity of the accounts required for efficient accounting and effective controlling. Uniform, harmonized group charts of accounts facilitate comparability within a Group.
Transfer Prices Provide the Organization with Important Incentive Mechanisms
Transfer prices for the internal cost allocation between business units and departments must be chosen both with consideration given to tax requirements and also the controlling function or incentive mechanism of the transfer prices. Internal functions and services have to compete with the services and prices on the “free market.”
Transparent Allocation Keys and Allocations Create Acceptance for the Controlling Approach
The use of allocation keys and allocations of overhead costs often involve extensive internal discussions within companies about the “cost-by-cause principle.” Open and transparent communication can significantly increase the acceptance of the controlling approach. If overhead costs cannot be allocated sensibly or only very generally, partial cost and contribution margin views are often the better alternative for controlling.
Integrated ERP Systems Increase Efficiency and Value Added in the Administrative Area
A close coupling of the flows of quantity and value from the logistics processes (purchasing, sales, accounting, planning, production and supply chain) by using integrated ERP systems reduces transactional activities and increases the efficiency of more complex cost accounting approaches. Modern ERP systems, for example, allow for the parallel mapping of the product business for standard products and the system, solution or service business.
Modern Business Intelligence Systems Support Operational Activities and Reporting
The use of BI systems can support both operational controlling and final reporting. For example, target/actual comparisons can be visually prepared automatically, or scenarios and forecasts can be docked to the actual figures in cost accounting. In addition to the use of supporting IT systems, the creation of the necessary database is critical to success.
We Will Accompany You in the Implementation and Sustainable Anchoring of your Cost Accounting and Controlling Concept
We have extensive experience in introducing and sustainably anchoring cost accounting and controlling concepts. Our approach is holistic – starting with the project initiation and extending to the transfer of the solution to operations. Our in-depth technical know-how and our understanding of the interplay between specialist departments and IT, as well as our change management expertise will let us assist you in the successful and secure implementation of your projects.
If you are interested or have any questions, please contact us.