A New Paradigm in Cost Management

Society of Cost Management

Society of Cost Management Blog

Value based cost management systems by CJ Connelly

Posted on by Michael Fournier

Today the buzz is all about customers—how to serve them better than the competition in order to gain a competitive edge. In order to achieve this goal, companies need a financial system that points to where their spending is aimed at providing customer satisfaction and where spending can be cut to either improve the bottom line or initiate price reductions. The value-based cost management system is such a financial approach. Using activity analysis that allows for one activity to have both value-added and nonvalue-added components, it provides a level of precision in costing analysis that can support strategic and tactical initiatives. It also marries cost and revenue by separating both into dollar terms based on customers’ value profiles so that costs can be directly tied to the value-creating actions of the firm. It is an innovative way to bring financial management into line with the efforts in marketing, product development, and customer service. It is one more step in the journey to keep finance relevant in the 21st century.

Posted in Value Management
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TOTAL COST: Becoming A Cost Management Leader

Posted on by Michael Fournier

Part 3 of a series on becoming a cost management leader

The Society of Cost Management was formed as a nexus for professionals in Cost Management. A place for us to come together, a focal point of information, for too long Cost Management has languished without focus, without direction, without the influence within our businesses that we should have. There has been some disagreement between us as to where to place blame.

The blame probably belongs as much with us, the Management Accountants, as it does to the Financial Accountants that we usually work for. The operations, sales, purchasing, and other folks that we work for have learned to expect less from us, this is no longer sufficient. Time to step up to the plate, time to help our businesses become the profitable entities they can be.

It doesn’t matter where the fault lay, members of the Society of Cost Management need to begin speaking in a unified voice, that starts today. In a LinkedIn discussion I started earlier today I ask for your assistance in revitalizing the discussion on differential analysis, the analysis the we do to determine whether to purchase a new piece of equipment, combine operations, sell a new product, etc. We have scratched around the surface of this before, but not really gotten anywhere.

Today you need to join in the discussion so that we can bring it to fruition, this is the first of many we will have. The end result must be new guidelines, a more effective, robust analysis. Being a leader in Cost Management means a new business focus, changing company culture. This begins now with a new approach to Differential Analysis, join in our LinkedIn discussion and help us define this new approach and lead the way to a new Cost Management.

This is the third part in our series on ‘becoming a cost management leader’. Each month we continue the discussion, in the first part we defined Cost Accounting and in the second Management Accounting. As the discussion continues and more members become involved we expand the meaning of what we are and begin the needed change in our profession. That change may involve education, new guidelines, or maybe a new certification. At this point we have not decided, this is still ours to determine.

Read  ‘TOTAL COST: Creating Demand Part 4 of a series on becoming a cost management leader’ next month as our discussion continues.

Posted in Total Cost
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TOTAL COST MANAGEMENT: Management Accounting

Posted on by Michael Fournier

Part 2 of a series on cost management leadership

If you think your business is a leader in cost management, please email us at info@costmgmt.org and let us know the name of the business and why they are a cost management leader. We want to know what sets it apart.

What is Management Accounting?

First, ask what is Financial Accounting? If Financial Accounting consists of preparing financial statements, auditing financial statements, and tax accounting, then Management Accounting would be everything that is remaining. From our first article in this series:

‘What Do Cost Accountants Really Do?

1. Maintain proper inventory valuation – lead cycle counts and physical inventories; calculate reserves and lead efforts to reduce excess, obsolete, and slow-moving; fix any type of transaction or receipt errors.

2. In a standard cost system, set standards and perform variance analysis (costing).

3. Perform any type of analysis required by the business, often this involves reconciling sales and COGS or performing differential analysis.

4. Forensic accounting, tracing through the ERP system to perform causal analysis.

5. The ‘expert’ of the ERP system.’

To the above, for Management Accounting we can add:

• Budgeting,
• Forecasting,
• Capital Budgeting and Investment Analysis,
• Performance Management, and
• Revenue Recognition.

Next article in the series

TOTAL COST MANAGEMENT: Becoming A Cost Management Leader
Part 3 of a series on becoming a cost management leader

Posted in Cost Management, Total Cost
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Some Great Educational Opportunities Headed Your Way

Posted on by Michael Fournier

*Seminars approved by the Society of Cost Management:  use the promo code SCM10 and receive a 10% discount on any course offered by IA Seminars.

September 8 – 9, Fixed Asset Accounting for Profit Maximization”, ARC Consulting Group, Minneapolis, MN

September 27, 2014 – “Top Trends in Management AccountingVirginia Society of CPA’s 44th Annual Virginia Accounting and Auditing Conference, Roanoke, VA

October 13 – 14, “Advanced Cost Accounting”, ARC Consulting Group, San Francisco, CA

October 30, 2014 – “Why Guess? Mastering the Fundamentals of an Accurate Cost SystemWilliam Vaughan Company, Livonia, MI

November 10, 2014 – “Why Guess? Mastering the Fundamentals of an Accurate Cost SystemWilliam Vaughan Company, Independence, OH

*November 11-14, 2014 – “21st Century Management AccountingIASeminars, Dubai

November 13 – 14, “Advanced Cost Accounting”, ARC Consulting Group, Jacksonville Beach, FL

*November 16-20, 2014 – “Activity-Based Costing Workshop for ManufacturersIASeminars, Dubai

*November 16-18, 2014 – “Performance Measurement and ManagementIA Seminars, Dubai

*November 19 – 20, 2014 – “Mergers and Acquisitions fo Grow the BusinessIA Seminars, Dubai

December 3, 2014 – “Why Guess? Mastering the Fundamentals of an Accurate Cost SystemWilliam Vaughan Company, Dublin OH

*December 8 – 10, 2014 – “Performance Measurement and ManagementIA Seminars, Miami, FL

*December 10 – 12, 2014 – “21st Century Management Accounting IASeminars, Miami, FL

*December 11 – 12, 2014 – “Mergers and Acquisition to Grow the BusinessIA Seminars, Miami, FL

December 11 – 12, “The Forensic Accounting Course”, ARC Consulting Group, Orlando, FL

*December 15 – 17, 2014 – *Management Accounting for Non-Accountant Decision MakersIA Seminars, Miami, FL

Various Dates, “Pricing for Profitability”, “Know Your Cost”, “Metrics Management”, “Understanding Inventory Accounting”, “Contemporary Cost Concepts” Executive Education, Inc.

Posted in Education and Certifications
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