Financial accounting versus cost accounting – what's the difference? Financial accountants calculate assets and liabilities and show outside investors how a firm is doing. A cost accountant analyzes financial processes within an organization and makes recommendations for improved cost-control management. If you want to reduce waste and increase cost efficiency, your organization could benefit from the services of a cost accountant.
What does a cost accountant do?
The main duties of a cost accountant are to:
- Compute costs of production/service and facilitate cost reduction
- Develop an internal reporting system for decision-making that cuts costs in the future
- Categorize cost classifications based on function (i.e., activities, products and processes)
- Collect, analyze, summarize and evaluate various alternative courses of action
- Complete gross margin analyses related to a company's products, inventory and overall value
- Investigate variances in financial records
- Establish inventory value as it changes with market fluctuations
When is it time to consider a cost accountant?
Here are some key questions to determine if a cost accountant can help your business:
- Do you need help deciding what to charge for products? By using intricate formulas, software and spreadsheets, a cost accountant can help business owners and managers determine product pricing.
- Do you need to improve net margins? Cost accounting can be a beneficial management tool for budgeting and setting up cost-control programs, which can improve future net margins.
- Do you need a better understanding of where the money is going and why? The cost accounting process assesses the input costs of each step of production, as well as fixed costs such as depreciation of capital equipment. A cost accountant will measure and record these costs individually and then compare input results to output or actual results. This will help management measure financial performance.
- Do you need to figure out where the "holes" are? Cost accountants can help companies identify solutions and create resources for "control gaps." A control gap occurs when a company collects a great deal of cash but has no method in place to keep it secure prior to depositing it. Cost accountants can help you design, create and implement strategies, best practices and process improvements.
What should you look for in a cost accountant?
Cost accountants should hold a bachelor's degree with an emphasis on accounting. Many companies prefer to hire cost accountants with at least three years of experience. Aside from familiarity with Microsoft Excel, enterprise resource planning (ERP) systems, and other accounting and spreadsheet software, cost accountants should have an understanding of various product cost-evaluation techniques. Cost accountants need to know how to design or create data collection systems and then analyze and interpret that data for upper management. Savvy soft skills for collaborating and communicating with people at different levels – from clerks to managers – are also important.
If you determine you don't have a full-time need for a cost accountant, consider a temporary professional instead. A specialized staffing agency like Accountemps can help assess your business' unique requirements and match you with a skilled and experienced cost accountant who can make an immediate difference.