Accountability Leads to Accurate Costing

Aug 06, 2014

There is a multitude of useful information that can be collected from reports that help determine costs. Reports like those that provide the of number of widgets produced, the number of people on a line, the time spent for maintenance, or time spent for set-up, etc. But, what do you do if you cannot get this information?

I was actually at one of my service clients the other day who bills differently based on a particular service being provided and time spent, etc. Their biggest issue was they could not get their people that were performing the tasks to properly record what they were doing. Even worse, they relied on the manager of each department and location to reconcile the reports and make sure they were accurate. They even set up bonus incentive plans to encourage these managers to get accurate reports. Their biggest issue was they could not accurately bill for services and customers were complaining because they were being charged for activities that did not even occur.

accountability road sign illustration designMy client asked me what he could do. I told him this reminded me of manufacturing and trying to collect data on the shop floor. What have you done that works?

I told him that relying on a manager and holding them accountable can be enough. However, in this case it was obvious it was not enough. You can do your best to hold others accountable and then it comes down to either they do it or they do not and then consequences occur. There are other more full-proof methods that often require capital. An example would be a barcode system. This is where the employee has to scan what process they are doing or what part they are using before they can begin the operation. This still is not full-proof though, as they may still do it without scanning what is being done.

In the end, you need to get the best information you can get to make the best decisions possible. I would love to hear what you have tried and successes and learning experiences you have had.

Categories: Cost Accounting