News

20/02/2010

The Value of Cost Accounting - Tony Hanson

 

Business by its nature tends to be very sales oriented, for the very obvious reason that without sales there is no business. What is sometimes not so obvious is that without controlling costs, or just as importantly, allocating costs to the sales for which they were generated, then a firm will not really know how profitable its sales really are.

 

I met a home builder that was excited about a new model of house. They were pushing to sell as many of this type of house as they could. At this time, I was hired to take over their accounting as Finance Director. The most startling thing I found was they had no cost control.

 

It’s easy to know what the revenue is for a house. I implemented a job costing system to allocate the cost of building a house to a specific project for that house. Previously the home builder had been able to see what their profits were on a monthly basis, but not broken down by project.

 

Now they were able to see for the first time what their profit was on each house. It turned out the model they were so excited about was actually losing money. Their biggest sales effort actually brought a loss to the business every time they were successful in selling one. Additionally they saw that other house models they previously showed little interest in had a very high profit margin.

 

As a result, they discontinued the previously favoured model, re-directed their sales focus on more profitable house models and became a very successful business.

 

The job costing system I implemented was Dynamics GP Project Accounting.

 

There are examples in other types of business where good cost control seems to be lacking. For example a publisher that was focused on getting the sales process just right, but there was no thought for tracking costs for each journal published.

 

Sales prices were the same whether delivered electronically or if a printed journal was delivered to the customer. What is the difference in cost for each? For both types there is the cost to create or author the product, but each type of delivery has different costs involved. Electronic journals require data storage, internet bandwidth, etc. Printed journals need to be printed, shipped, stored and delivered to the customer.

 

How does the publisher really know the best way to focus their sales to get the best return for their business? Depending on the best way to track the costs of production and delivery, then a manufacturing or project type solution could be a good option to gather and track the costs of a journal or subscription.

 

Even for businesses where costs are used to generate revenues, sometimes only the billable costs are tracked.

 

For example, an engineering firm that bills its engineers’ time to customers had for years only tracked that billable time against its projects. They came to us to implement a proper project accounting solution to be able to track all costs associated with a project, to that project, to get a true reflection of profit for each one.

 

Another way to allocate costs to sales is through the course of time. Take the distribution company that properly tracks the purchase of stock and records a cost of sales whenever an item is sold. What about other costs like producing the product catalogue? This cost is recorded as an expense when it is paid.

 

A more appropriate way to account for the cost of producing the catalogue is to record a deferred expense in the balance sheet and allocate the cost over the life of the catalogue to the expense account. That way profit is not understated in the period of producing the catalogue and overstated in the periods of the life of the catalogue.

 

There are a number of products that help ensure revenues and costs are recorded in the appropriate period such as Revenue and Expense Deferrals, Contract Administration and Purchase Invoice Approvals and Accruals.

In this example Revenue and Expense Deferrals would be a good tool to easily spread the cost of producing the catalogue to the periods that make up the life of the catalogue.

 

Sales are a very important part of business but it should not be the only focus.

 

Keeping track of and managing costs is just as important, because turnover is not the most important line in the Statement of Profit and Loss, net income is.

If you would like more information on the products mentioned please contact Vicky Luke (vickyl@benteq.co.uk) or access our web site and type in the name of the product in which you are interested in the ‘search’ field on the home page.

 

  • Project Accounting
  • Revenue and Expense Deferrals
  • Contract Administration
  • Purchase Invoice Approvals and Accruals
  • Analytical Accounting

 

The article’s author, Tony Hanson, is a consultant at Benteq and joined the company in January 2008 having held the position of Finance Director in a number of organisations where he used, or implemented Dynamics GP.

Tony is from Colorado USA and contacted Benteq upon his arrival in the UK when he was looking for a change in career direction from being an end user to a consultant.

19/02/2010

Dashboards In Dynamics GP v10

You may have heard about dashboards and you may have read that having a dashboard allows you to receive all of your information in one place, in a way that is easy for you to identify key business information, to allow you to make informed decisions.

 

This all sounds great, but what exactly is a dashboard? How easy are they to incorporate into your business and will they really provide any benefit to you?

Dashboards have started to gain popularity in a business environment as more people are discovering the benefits of having easy to use, shared information. The most important aspect is that the data is clearly visible and easy for all users to read.

 

Just like in a vehicle, the dashboard tells you all you need to know about your vehicle to drive it successfully, in a way where you can see it at a glance. The best part is that your business dashboards can be the key information that your business needs, which is entirely personal. Your business dashboard does not have to look like any other businesses dashboard.

Dashboards can be created to assist with real life business processes and exist to aid users in knowing where documents are in a workflow through a business, or to assist at a corporate level monitoring KPI information.

The design of dashboards can be very flexible and modular, allowing one set of users to have dashboards tailored to their needs, differing from other users.

 

Dashboards have seen much growth and development over the past few years and many software authors have put considerable effort into making products that will create very clever deployable solutions. Among these are countless expert solutions that are used by some of the larger Fortune 500 companies globally and many other companies around the world.

While there are all these fantastic solutions available, there is nothing that can prevent you from creating some very professional and extremely useful real time data dashboards, using just Dynamics GP and the Microsoft office suite of tools.

 

As Dynamics GP operates using Microsoft SQL Server as its database storage engine, the office tools can easily link into this data using industry standard data connections. With a small understanding of the data you are trying to find and using the Dynamics GP resources, you will be able to create an informative tool that can be used by many people within your organisation.

Benteq has worked with a number of clients creating some extremely functional tailor made dashboards, such as the example displayed in the insert, to assist them in providing their decision makers with the key information they require. All this has been done using the Microsoft office suite, with no third party product purchases being required.

If you would like to discuss this subject further with us, please contact Kathryn Foster and do not feel you have to wait for the webinar. kathrynf@benteq.co.uk

 

02/10/2008

How MS Dynamics GP v10 Feature Pack adds to Field Services

If you have engineers or technicians looking after customers on the road, using combined Dynamics GP/CRM modules can help you manage complex field operations, record all costs and activities and give quality in customer service.


MS Dynamics GP v10 Feature Pack released in 2008 offers Field Services the following functions:


  • Ability to add Sales Order Processing (SOP) lines to an existing contract
  • Consolidated Service Call billing, which includes letting you see all the service call invoices across user-defined dates
  • Improved Reconciliation reporting letting you review totals that were corrected through reconciliation procedures
  • The Contract Move Lines feature now works with Quote Type contracts
  • Ability in Equipment Maintenance to see original sales order details such as notes, pricing, and earlier quote or order detail
  • Ability to add type of contract to the Service Call Entry window for each item or piece of equipment and
  • Depot Inquiry can now open to Work Order Inquiry windows, allowing quick enquiry and stopping accidental charging.

Find out more about MS Dynamic GP's v10 Feature Pack for your Enterprise Resource Planning (ERP) needs.


02/10/2008

MS Dynamics GP in a nutshell

Dynamics GP is a powerful ERP software application which offers much without substantial customisation. ERP software embraces just about every business function. So it's essential that you make sure it suits your business and budget and can be picked up easily by staff.


A few years ago Dynamics GP was pitched at medium sized businesses through its modular pricing system. That changed in summer 2006 with Business Ready Licensing (BRL) - enabling smaller businesses to buy this 'out of the box' software package.


Microsoft Dynamics GP v10.0 is the most up to date version, with some earlier versions carrying Great Plains as main product name.


So what's so good about Dynamics?

Dynamics GP gives you the ability to handle all these key business activities:


  • financial management
  • distribution
  • project management
  • business intelligence and reporting
  • HR functions and
  • manufacturing.

It also offers impressive integration with customer relationship management (CRM) software using roles-based screens. Staff can easily adapt to Dynamic's MS Outlook component and customisable home pages and screens. Helping to reduce staff training time and realise key business cost savings.


 

 

For further information about Benteq

Contact your local office and we will be pleased to help.