At the beginning of the year, we are all full of good intentions. One of the most common is to be better organized, both personally and in our professional lives. These resolutions also happen with companies, for example with regard to cost-accounting. But is it best done daily, frequently, monthly, or quarterly? This article analyses the issue.
Thanks to cost-accounting, we can analyse and keep control of the costs generated by the company, where they occur, how they evolve at different times and with regard to the established budget.
This kind of accounting can therefore be a great tool for improving the efficiency of cost management within the company, making cost-accounting a business necessity. The question is "how often?" Cost-accounting, being an internal mechanism, is not required by law, and is not subject to any fixed requirements or obligations, but we can make an assessment of the best practice in the matter.
To decide how often we want to carry out this kind of accounting exercise, we need to consider two principal factors: the effort required to do it, and the benefits it brings.
- Daily monitoring
- Quarterly monitoring
- Monthly monitoring
Daily, or at least fairly frequent checking of costs allows the detection of any irregularity or deviation almost instantly. This is obviously very beneficial in that it allows us to cut short the problems, because early detection makes it much easier to rectify the situation.
But it is also true that this kind of monitoring can be impossible without access to up-to-date expenditure information and details of costs incurred. Today, we have technologies that make it possible to track the company's costs almost in real time. An example of this is Captio, which allows business travel costs incurred by employees to be recorded and categorized instantaneously. So, with this kind of tool available to automate and simplify monitoring, it may be very beneficial to be able to make it a routine action.
At the opposite end of the scale, we have the option of carrying out a cost-accounting exercise each quarter. In this case, the task of checking the cost account is performed 4 times per year, meaning that the workload required of the department responsible, normally accounting and finance, is concentrated into those particular periods, and that can be organizationally easier. Even so, there is no reason why it always has to be done, that way - it may coincide with that department's busiest periods, like the year end, when many things have to be done, like completing end-of-year balances, drafting next year's budget, etc.
Neither should we lose sight of the fact that irregularities or deviations produced during that quarter might indicate a festering problem that could become more difficult, or even impossible, to resolve in a satisfactory way. For this reason, leaving the task for this length of time is not recommended, as it could lead to more work and less efficient problem-solving.
Monthly monitoring would seem to be the happy medium between the two preceding options. While not as efficient as daily monitoring, it allows sufficient time-margins to ensure that everything in the cost account is as it should be, and to take measures as necessary.
It can also be made to coincide with the times when workers hand in their expenses sheets, thus providing the simultaneous benefit of checking that the company expenses policy is being followed.
So, although it is not an obligatory task, it is advisable to carry out cost accounting regularly and not to leave it too long from one check to the next, so as to be able to correct deviations and irregularities as efficiently as possible. The technology available today makes it possible to keep tabs on expenses almost in real time, so the challenge lies with the processes and the people in charge of the department and of the company.