Tag Archives | job costing

Time Saving Tip for Filing Vendor Invoices

See Also:
Accounts Payable Turnover
Accounts Receivable
Accounts Receivable Turnover
Chart of Accounts (COA)
Problems in Chart of Accounts Design

Current Practice

How do you file your paid vendor invoices? Alphabetically? Who taught you to do it that way? Have you ever wondered why?

How often do you go back and research a paid accounts payable invoice? How much time does it take?

Have you ever thought that there might be a better way?

History

Filing vendor invoices alphabetically has been a practice since before the time of computers. With accounting theory in existence for centuries it is safe to say that the practice has been in place for some time. In a manual environment, it is useful to be able to research invoices, especially if there is a lot of volume involved. But is it necessary in today’s computer environment to manually sort data?

Best Practice for Filing Vendor Invoices

By using the computer to sort for information, you no longer need to do so manually. Once a vendor invoice has been paid you should then file it in check number sequence or by date. This practice will save both the time to prepare the file folders, sort the paid invoices and the filing of those invoices. Additional benefits include not having to use as much supplies nor take as much space to store.’

Arguments Against

The most common argument against this best practice (other than that’s not the way we have been doing it!) is that we need to be able to go back to the original invoice. There might be certain situations such as construction job costing that would require you to review previous bids. However, most often this objection can be countered by recording the required information in the computer, negating the need to go to the source document. In fact, as more companies adopt scanning of original source documents the ability to use a manual filing system will go away.

Conclusion

If you have not re-engineered your filing practices for paid vendor invoices then you are not realizing all of the time savings efficiencies of the computer. In fact, your system is a hybrid manual and computer system. Instead of designing your accounting system around the computer, you take the computer and wrapped it around your manual system!

filing vendor invoices

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Job Costing

See Also:
Implementing Activity Based Costing
Standard Costing System
Process Costing
Activity-based Costing (ABC) vs Traditional Costing
Absorption vs Variable Costing

Job Costing Definition

Job costing is defined as a method of recording the costs of a manufacturing job, rather than process. With job costing systems, a project manager or accountant can keep track of the cost of each job, maintaining data which is often more relevant to the operations of the business.

Job Costing Meaning

Job costing, generally, means a specific accounting methodology used to track the expense of creating a unique product. Due to the fact that certain projects, such as construction, require different operations, accountants use this methodology to trace the expenses of each job in order to use this information for analysis and tax needs. Job costing forms have spaces to include direct labor, direct materials, and overhead.

Costs stay in the work-in-process account throughout the job. When the job is finally completed, they are transferred to the finished goods account. By using this method, accountants can make sense of complicated jobs which are moving towards the process of completion.

Indirect costs, like overhead, are applied as a fraction of direct costs. This is usually done in one of two ways: an association with labor hours or using activity based costing. This way, either through use of labor or certain tools, overhead will not be left out of the equation and a company can make sure to cover all essential costs using job costing.

Industries which produce products as jobs use this method. This includes job costing for construction, but goes much farther than just this. Shipping, auditing, maintenance and repair, installation, and any industry which creates products unique to each need. In this situation, job costing is often the most efficient method.

Job Costing Example

For example, Roy was once the curator of a large museum in the United States. Connecting with the science community on many levels, he has enjoyed his career. After some time, Roy decided he would make a career change. He has since started a company which provides maintenance work on historical works which reside in museums.

Roy has all the connections he needs for this business: other curators, archaeologists, and the entire community in his rolodex. After a little effort, he was able to connect with the people who perform this work. Roy will take the role of salesperson, but he needed to hire a team to perform operations. Roy is quite successful. His one concern, an area of ignorance for him, is how the bookkeeping will take place. So he hires an accountant, sets a meeting, and begins to learn about how his business will overcome this need.

The Most Efficient Accounting Methodology

The accountant shares that job costing will be, probably, the most efficient accounting methodology. Roy can keep track of the costs for each of his contracts by implementing this type of accounting. He will be able to find which items take more or less time to maintain. Additionally, he can make sure to create company profits by adding a margin on top of his costs. By using a job costing software, bookkeepers can run the system quite smoothly.

Roy can rest at ease with this accounting method. Knowing he can rely on his accountant, Roy begins to contact prospect customers and former peers. He has confidence that his business will be a success. He looks forward to gaining his first customer.

Job costing is just another way to know your economics or financials. Click here to download the Know Your Economics Worksheet to shape your economics to result in profit.

Job Costing

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Job Costing

 

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