Cost Accounting as a Profession
Aug 21, 2014
I am constantly amazed by the broad diversity of costing systems that are in use in American businesses today. Different industries, different products, different regions of the country all give rise to various needs in the method of costing products. It seems to me that product costing revolves around several key points. First is inventory valuation, second is profitability tracking and a possible third is management control or measurement programs for measuring the effectiveness of management.
Many cost managers are attempting to meet a broad base of cost system needs with simplified cost results at the great risk of misinforming the users of such cost data and creating further inefficiencies or lack of profitability because of this misinformation.
In my opinion at the root of this problem is a general lack of core knowledge as to what cost systems should do, can do and reasonable outcomes from the data that the cost systems provide. Further, it seems to me that there are many people in significant levels of responsibility in the area of cost management and development that have limited or no knowledge concerning how product costs should be managed yet find themselves making decisions regarding the calculations and management of this data.
This leaves cost accountants all over the country struggling with conflicting goals sometimes less than comprehensive instructions trying to provide meaningful data that improves their companies overall profitability.
I began my career with a number of low-level costing jobs. Much of this work concerned reoccurring but relatively simple tasks. Much of which I did, I did not understand and was being done in strict compliance with a set of guidelines that my supervisor laid out for me but without any real grasp as to be issues at hand.
My overall review of the process was that much of it was company policy or my supervisor’s opinions and there were no written guidelines from a technical standard point of view that was relevant to what I was doing.
As I think about the state of cost accounting today it does not appear to me that much has changed related to the overall state of technical guidance or raising cost accounting to a professional status.
As I think about many other professions including medicine, law, engineering, accounting, there are a number of common components in each of those professions that would need to exist to raise cost accounting to the level it deserves in American business. The first component would be the creation of an independent entity to act as the central control to support and oversee the profession. The second would be to create a common body of knowledge that represents guidelines and an over-arching principle of the profession. The third standard, I know exists in many professions, is some sort of recognition for having achieved an understanding of those principles whether it be by academic test, by experience or in some cases some combination of both. There needs to be some recognition of achievement by an individual in the professional area. The next thing would be the establishment of an independent body to ensure that the professionals are living up to the standards to which they agreed. The final item would be professional training sponsored by the independent body that would assure that the professional members of the group are constantly being offered the highest and best training available for that profession.
As we consider all these possibilities related to the profession of cost accounting, I believe that there is a significant opportunity today to move the technical area of cost accounting to the professional status it has long deserved and provide guidance, oversight and career development opportunities for cost accountants all over the world.
Categories: Cost Accounting