Getting “In Touch” With Your Manufacturing Department

May 29, 2015

I recently taught a course for a group of cost accountants from various industries. Part of the course materials included active involvement by the attendees. Each participant has diverse costing experiences and methods for working through unique problems based on their industry. We believe this to be the best format as it adds value to the entire group.

One of the topics we consider is the need for members of the cost accounting team, in any business, to periodically visit the operations that are included in the cost data and with which the cost accountant is working. We are frequently surprised with our own clients and how out of touch the cost accounting department has become in relation to operational changes. These encompass changes in products and staffing which are part of most businesses ongoing improvement plans.

If your continuous improvement plans are not carefully monitored by the cost accounting group then errors begin to creep into the cost system. These are often caused by unintentional oversights because current developments are not being reflected in how costs are accumulated and measured. The end result is the cost system becomes less and less accurate and, therefore, more and more unreliable.

One of our attendees said that it was a requirement of his job that he spend 40% of his time in the manufacturing area. I was unable to conclude whether that meant he simply had to visit the manufacturing area during his day or if he was actually assigned a permanent working position in the manufacturing area.

We have worked with other business which required the entire cost accounting team to be located in the manufacturing area and not in the accounting department to force them to walk through the manufacturing area upon arrival and departure. This ensured that at least twice a day they would have the opportunity to observe any changes that had taken place. The goal of both of these unique company policies was to be sure that the cost accounting group had access to the most up-to-date and relevant information that was happening in the production department and would be important to the development of accurate job costing information.

We have had other attendees at our cost forums admit they had never been in the manufacturing area associated with the job costing information system with which they were working. I believe those individuals are disadvantaged and run extreme risks of providing inaccurate costing information simply because they are out of touch with what is happening in the day-to-day operations of the roduction areas under their responsibility.

The point to be made on this subject is that the best and most relevant cost information is based on the best and most relevant production processes and staffing levels and that can only be derived by continuous interaction between cost accounting, engineering and production.

Categories: Cost Accounting