I’m an Accountant, Not an Assembly Line Operator?
Oct 07, 2013
I’ve written many times about how important it is for cost accountants to know what is happening on the operations side of their business. The fact is, if you want to be effective, accurate and relevant in the cost accounting area, you have to have detailed knowledge about how the manufacturing process works and the “status” of the manufacturing process. What do I mean by status?
Just because you developed the cost model based on certain assumptions, you need to know what is currently operational, what is not and why? When will it be operational? Where are the bottlenecks? What difficulties might exist with quality? You must be able to recognize the technical portions of the manufacturing process that require specialized engineering help to resolve. These items should at least be familiar to a cost accountant so that he or she knows what issues there are to be dealt with in those areas. The entire focus of cost accounting today is to develop accurate, relevant information that is useful for a broad range of subjects. This can only be done with a first-hand knowledge of what is happening in the manufacturing area. Cost accountants that attempt to do this from their ivory tower, irrespective of how talented they are, will find that very quickly their information becomes outdated and irrelevant because of changes in the manufacturing process.
I know of some companies that are proactive in this area and have located their cost accounting department in the central office of the manufacturing offices. This allows the cost accountants to be constantly exposed to changes in the manufacturing process. Even with the simple nuance of walking back and forth through the production facility from their desks throughout the day, they are exposed to the operations side of the business.
The only reason I mention this is that I was recently reminded how important this was after visiting with the client that has a very sophisticated costing system. The purpose of the meeting was to talk about possible changes and improvements to the cost model. The meeting was attended by a number of people including several from operations. During the meeting the manufacturing people brought up several major changes that had occurred on the production floor that came as a surprise to the cost accountants. The difficulty is the cost accountants were proposing changes to the cost model that were not in tandem with the changes on the production floor.
If you’re currently in a position where you hold responsibility for the accuracy of your cost system, I would recommend that no less frequently than weekly you make it a point to walk through the production facility to see what has changed. In addition, a weekly conversation with the plant manager will help identify any changes implemented you can build those in to the costing model. Your ability to effectively communicate with your manufacturing team is crucial to the credibility and accuracy of your cost model.
Categories: Cost Accounting