Are Book Smarts Enough When it Comes To Cost Accounting?

Nov 25, 2013

I have noticed lately on LinkedIn that a lot of accountants are adding “Cost Accounting” as their area of expertise. Not to single out anyone in particular, but there are many accountants that I know personally and I don’t honestly think they could hold a civilized conversation about cost accounting. Even though this is an important point, it is not the focus of my post today.

I consider myself very knowledgeable when it comes to helping companies identify problems and improve their cost accounting systems. That includes both the methodology and the systems that support it. I had a conversation with a cost accountant last week that made me think about how comprehensive my own knowledge really is.

I have spent 20 years in public accounting, and started helping clients with their costing issues nearly 15 years ago. I have toured numerous manufacturing facilities and had meetings with countless cost accountants, controllers, business owners, and other “cost accounting specialists” throughout the years. However, I have not actually worked in a manufacturing facility nor have I been an accountant for a manufacturing facility. My entire experience has been as an outside consultant working in public accounting.

Someone rightfully so pointed that out to me last week. At first I was taken aback, it was kind of like the comment regarding consultants: “those who can do, those who cannot, consult”. Funny, huh? I got to thinking –  am I missing some big foundation of knowledge because I have not had that “hands-on” experience? Am I really providing a disservice to my cost accounting clients because I am lacking in “real” world experience? Of course I am going to lean towards NO.  After a significant amount of consideration , I believe I have the facts to support my NO.

I have said before, product costing is not black and white, and always requires a great deal of knowledge and subjective judgment. As I iterated previously, my experience as a consultant has afforded me the opportunity to experience numerous costing theories. These theories have been played out by experienced cost accountants and extremely inexperienced controllers using systems ranging from simple one-page excel spreadsheets to million dollar ERP systems. I have assisted clients with the simplest of problems to the most complicated and in a wide range of industries. In comparison, many of the individuals I am helping have performed in a narrow range of capacity for one, or a few different employers.

My conclusion? The diversity of my experience has provided me exposure far beyond what I would have obtained as a long-term controller or cost accountant at a manufacturing facility. I have a unique perspective each time I enter a new facility and I am able to quickly identify potential discrepancies in a system. It is true that as a cost accountant, especially if you are involved, you should know the details of the operations and how they are applied in the cost model. However, sometimes you are TOO CLOSE to the process to take the aerial view, and make sure the puzzle fits together. So, for now I will rephrase the age old saying, “Those who can do, those who can do better, consult!”

Categories: Cost Accounting