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Accounting for Manufacturing

Accounting for Manufacturing

Manufacturing nowadays is getting more export-oriented and started relying more on global supply chains. Increased global exposures demand manufacturing accountants to be more familiar with the regulatory requirements of other countries and better equipped with changing manufacturing practices for continuous improvements through quality, cost, and lead time optimization. There is an ever-increasing pressure for financial data analysis leading to waste identification and elimination.

Principles of Accounting for Manufacturing Company

Manufacturing businesses are unique as also the manufacturing accounting. The accounting for a manufacturing business deals with inventory valuation and cost of goods sold. In other businesses, these two aspects are handled in a more simplified manner.

Manufacturing businesses use certain raw materials and convert them into finished products through various manufacturing and value-added process stages using appropriate machinery and manpower. At any given point of time, a manufacturing business has raw materials inventory, in-process or semi-finished inventory, and finished goods inventory.

Inventory valuations are done through Direct cost allocation, overhead cost allocation, and impairment testing. Indirect cost allocation, costs are arrived at through standard costs or weighted average or cost layering. In overhead cost allocation, factory overheads are aggregated into cost pools and allocated to the number of goods produced over a reporting period. In impairment testing, inventories are written down to market value.

Selection criteria for Manufacturing Accounting Systems

Manufacturing accounting principles

Manufacturing accounting principles and systems deal with accounting software, and selecting the right kind of manufacturing accounting software is the main requirement.

  • Software Price and features
  • Software reviews and references
  • Software used in a similar type of industries
  • Software that can be scaled up with your business growth
  • Online cloud-based accounting software for flexibility and lower initial investment
  • Customizability of Software
Manufacturing Accounting Processes

Once the right software is selected, appropriate accounting processes need to be followed for the best utilization of financial data. The following are some accounting processes normally used in a manufacturing set up

  • Process Costing
  • Activity-based costing
  • Variable costing
  • Job order costing
  • Absorption Costing

Challenges in Accounting for Manufacturing

Accountants related to a manufacturing business face a lot of challenges and are forced to make agonizing decisions. Outsourcing accounting services for manufacturing always helps you mitigate the challenges. Accounting through a non-core activity is really vital for your business growth and survival. A few challenges are

  • Complexities in Inventory accounting and Valuation
  • Ambiguous ROI calculations and determination of productive life of machines
  • Allocating costs to individual process stages and determining value addition
  • Cost of goods and sale price determination
  • Highly competitive market asking for cheaper, faster, and better products

Benefits of selecting IMC as your preferred Manufacturing Accounting Services

  • Provide you access to new tech solutions and external expertise.
  • Help you concentrate more on core competencies.
  • Support you for better cost control and management for manufacturing inventory accounting
  • Assist you in selecting the most appropriate accounting methods suitable for your manufacturing business.
  • Track and collate your manufacturing business data online for periodic analysis and reporting and help support timely financial decision making.
  • Accountants with a deep understanding of the manufacturing business and all relevant manufacturing accounting standards.
  • Trained and experienced accountants who are well conversant in lean manufacturing accounting principles.
  • Long exposure in manufacturing accounting business.
  • Zoho, QuickBooks, and Xero certified accountants who can handle all your accounting for manufacturing operations

Services Offered

IMC is a customer-centric accounting services company and offers the following services

  • Management Accounting for Manufacturing company
  • Workflow Analysis
  • Cost Segregation
  • Financial Reporting
  • Inventory Valuation
  • Cash flow management and budgeting
  • Cost Accounting
  • Internal Auditing
  • Tax Planning and compliance
  • Profit Analysis and reconciliation

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