Having Control of Your Costs

May 18, 2015

I received a question the other day related to internal controls with regards to cost accounting. I found it rather intriguing as typically this is not something you associate together. Internal controls are typically related to accounting principles.

Business_Graphs8From an accounting perspective, internal controls are related to proper segregation and control of accounting functions. Having the correct internal controls in place not only makes you compliant from an auditing standpoint, but also can safeguard from possible fraud.

I cannot think how internal controls related to cost accounting might have the same effect. There are no GAAP rules associated with cost accounting and internal controls. I do, however, believe it is important to have control over all the costs associated with your business. If you do not know your cost or do not have control of your costs, you may be losing money without realizing. With the proper controls in place to safeguard against such, you may be able to prevent a disaster.

Knowing your costs is extremely important. Recognizing your costs and not maintaining them proves to be useless. Having controls necessary to prevent this from happening and to force reconciliation seems quite logical.

I am curious as to if any of you have any type of internal controls associated with your costing? It does make sense to safeguard your efforts and valuable information.

Categories: Cost Accounting