certifications

Costs are an important part of the business. Let them spiral out of control, they will affect both your profitability and cash flow. In meeting the needs and wants of customers, organisations have to employ the use of processes and activities. These processes and activities are critical for creating customer value.

However, to effectively and efficiently manage business costs, one has to have a thorough knowledge and understanding of all the activities and processes employed within the business to create value. In addition to that, knowledge of cost drivers is very critical. A cost driver being a factor influencing the level of cost.

One technique that can be used to analyse and manage your business costs is Activity Based Costing (ABC). This is a cost management technique which measures the cost and performance of activities, resources and the objects which consume them in order to generate more accurate and meaningful information for decision making.

As the modern business has become complex, it is no longer meaningful to assume that overheads are a function of volume only. Businesses now have multiple cost drivers, many of which are transaction-based rather than volume-based. Most organisations have moved and some are still in the process of moving from managing vertically to managing horizontally. What this means is that, there is a shift from a function orientation to a process orientation so as to effectively and efficiently meet changing customer needs and wants.

This focus by management on process or horizontal view of their organisations to remain competitive is supported by ABC since it provides cost and operating information that mirrors the horizontal view.

The benefits of implementing ABC include:
o It helps you identify all the overheads caused by the same activities.
o One can easily identify the cost drivers for each activity thereby allowing you to control costs at their source.
o It can help you identify, for example, profitable products, services, processes, activities, customer segments, distribution channels, contracts and projects. This should help you when making pricing, product/service mix and design decisions.
o ABC allows for continuous improvement. By thoroughly measuring and looking at the costs and cost drivers of different processes and activities, improvements can be made. For example, by knowing the cost drivers, cost reduction can be achieved, either through outsourcing particular activities or moving to different areas in the industry value chain.

Dave Packard Chairmen of Hewlett-Packard said "Tell me how a person is measured and I'll tell you how they will perform."

Business Metrics are tailored performance measures that promote the strategic goals and objectives of the organiza­tion.

The spectrum of business measurements spans a wide variety of Management Accounting methods. Traditional financial measures, such as Work in Process (WIP) and piece rates, are rapidly being replaced by time based measures, like Raw and In-Process (RIP) and rate based planning.

As competition and the internal search for improved performance becomes more critical, the development of time-based measures has become a cornerstone of the World Class Manufacturing paradigm.

There are several recent business measurement innovations that this series of articles will cover. We begin this series with "What is Activity Based Costing (ABC)".

Traditional cost accounting systems measure the cost of a product by spreading all of the overhead costs over the direct labor costs based on production volumes.

For example:

Product A takes 3 hours/unit of DL

Product B takes 7 hours/unit of DL

DL = Direct Labor

If quantity one of each is produced:

Product A receives 30% of overhead Product B receives 70% of overhead

Therefore if Total overhead cost was $100 and the labor rate was $10/hour, then the costs would be:

Product A (3* 10) + (.3* 100) =30+ 30= $ 60/unit

Product B (7* 10) + (.7* 100) =70+ 70= $140/unit

ARRIVING AT THE CORRECT PRODUCT COST

Under Activity Based Costing the concept of cost drivers is developed to clearly define which costs are associated with each product. An example of a cost driver might be the number of parts in a product, or the number of set-ups needed to produce the product, or the number of change orders after release to production.

To clarify the above example:

Product A requires 45 component parts Product B requires 5 component parts

Each part is purchased from a separate vendor. The cost to generate a Purchase order is $70. If we assume that we issue purchase orders and receive and pay for material once per month the costs of the products would be:

Product A (45 parts x $70) = $3150

Product B ( 5 parts x $70) = $ 350

Total Purchasing cost= $3500

Under the traditional cost allocation procedures the $3500 purchasing overhead would be divided as follows:

Product A: $3500 x .3 = $1050

Product B: $3500 x .7 = $2450

As you can see the purchasing cost of the products are significantly different using the traditional cost accounting method.

Developing a Simple ABC system

To begin we must start with a few new definitions. Over­head Activities are divided into Cost Pools. An example of a cost pool would be the Sales Department. Cost pools contain cost elements. An example of an overhead cost element would be order processing.

Once the overhead cost pools are established, Activity Cost Pools are developed. An example would be product support which is volume dependent. Activity Cost Pools, known as Cost drivers, contain cost elements also. An example of an Activity Cost element would be product test.

Finally, there are Product Cost Objects. An example of a product cost object is a product line. Product Cost Objects also contain cost elements. An example of a Product Cost element would be a specific product within the product line.

Hewlett-Packard's Roseville Division manufactured printed circuit boards. They implemented ABC as part of a Total Quality Control (TQC) project that focused on Design for Manufacturability. The new costing data allowed design engineers to make more effective cost tradeoffs which reduced the total cost to manufacture new products. Roseville developed 12 cost pools that impacted product cost. In Purchasing, the cost drivers are the number of active parts and the complexity of the part. In the Produc­t Planning and Production Engineering areas, the cost driver is the number of assemblies in the product. In printed circuit board loading areas the cost driver is the number of insertions, an insertion being a component that is soldered to a printed circuit board. The Support cost pool is sub-divided into several smaller groups, such as Test Engineering and IT. The cost driver for Support is % of Usage.

In the traditional accounting system only one measure is used to allocate overhead costs, Direct Labor Hours. Using ABC we can create hundreds of cost drivers. There is how­ever, a diminishing return. Data collection costs usually increase faster than the benefit gained by the improved precision of the allocation. Some companies in Europe have as many as 50 - 150cost drivers. In the United States approximately 6-25is more common. Europe has been using ABC longer than the U.S.; this may account for the wide difference in the number of cost drivers.

"Firms facing intense competition and having both high product diversity and low measurement cost are best suited to taking advantage of the increased accuracy of an activity-based Costing system." Robin Cooper, Harvard Business School

By prioritizing the Overhead costs you can focus on those with the biggest potential for causing the product cost to be inaccurate. As with all projects of this nature a multi­functional team is required to effectively cover the wide variety of business activities related to product costs.

Cost drivers should be developed for those activities that contribute to product cost on both a volume and volume in­dependent basis. For example a set-up would be volume independent if the order quantity was changed. Warehouse activity, on the other hand, is directly related to the volume of product being handled.

Chapter 4 of MEASURING UP by Hall, Johnson, and Turney provides a good basic understanding of ABC. This book is available from Amazon: Measuring UP

For more information on the current evolution of ABC see the Robert Kaplan article from the Harvard Business Review: [http://hbswk.hbs.edu/item/4587.html]

Automating ABC

The EasyABCPlus ™ program is divided into three major areas. The first is overhead; here your company General Ledger can be entered. This can be done either by typing in the Overhead Accounts, or by reading a file from your accounting package, or a spreadsheet. The second area is activities; this module is the core of the system. It defines the Cost Drivers and the allocation methods from the Overhead module to the third area, Cost Objects. In the Cost Object area the actual products to be costed are linked to the activities used to produce them.

Let's review each module in a little more detail. Within the overhead module you can see the structure of the accounts, with actual and budget amounts for each. There is also a block map showing where you are in the system. As you move from module to module the three boxes are highlighted to show where you are in the program. There are also three icons or graphic symbols that represent different views of the data. The icons are available in all three modules. They are: Decomposition, Allocation and Tabular. Each presents the information in that module using the same data, but with a different perspective.

Data entry in the modules is primarily via menus selected using a mouse. A mouse is a small device attached to your PC that moves the cursor on the screen. Clicking a mouse button activates the function that the cursor is covering.

An example of data for the Overhead Module would be:

Sales Department with a cost center Product Support.

The Activity Module contains the cost drivers and other resources used by the product. A typical structure might include a Support Activities group. This could have within it activities such as Testing, Engineering Support, and Phone Support.

The Product Support cost center is linked to the Testing, Engineering and Phone Support Activities. This means that a structure similar to a bill of material is created. The allocation methods are by percentage or cost driver. The allocation method is comparable to the quantity per in a bill of material.

The Cost Object module is where the products are defined. After entering Product A and Product B, we select which Activities and how much of each activity is used by each product. The Activities such as Testing might be the number of Test hours, Engineering Support is the number of Engineering Change Orders, and Phone Support is meas­ured by the number of phone calls.

We are now ready to run the model. The model can be run for any number of periods. It can also be run by module to observe the effect of changes at each level. To see the results click on the icon in front of the product. This brings up a screen that shows the actual cost and budget of each of the activities used.

The Attribute Costing report summarizes the costs of all value added and non-value added activities. This is especially useful in Lean process improvement programs.

On-line help is available for each area in the system.

This completes the Activity Based Costing overview.

A00-260 Sending money abroad is not as complicated as it was a few decades ago but you should be aware that many governments worldwide impose restrictions on foreign exchange payments and on possession of foreign currency. These restrictions can apply to local residents or non-residents alike and knowing the local legislation will help you avoid unnecessary complications. Of course, it is hard to be acquainted with the local laws and regulations in detail; therefore, taking a good advice from an expert specialising in money transfers is more than advisable.
Various forms of foreign exchange controls exist but you do not have to know all the details of a particular foreign exchange regime. The important details related to money transfers include: whether a restriction on the amount of currency that is transacted is in force and is there a restriction on who can conduct foreign currency exchange deals (in some countries only state or government-approved companies can be engaged in the exchange of foreign currency). A stricter form of a foreign exchange control can impose restrictions on the use of possession of foreign currency.
A00-270 If your money transfer is to be processed by a state-controlled foreign exchange dealer, there is a greater chance to get an unfavourable exchange rate or to be subject to additional fees and commissions. A form of a special currency regime is the currency board but the existence of such a monetary authority protects and supports the local currency so it is in advantage to a foreign currency sender in general.
At this stage you must turn to a reputable money transfer specialist who is familiar with the local specifics of the beneficiary's country. Unfortunately, the number of countries where strict exchange controls are in force is constantly changing in the process of globalisation and economic liberalisation.
Some major countries, which still exercise some kind of foreign exchange controls, include Argentina, Brazil, China, Egypt, India, Malaysia, Morocco, Nigeria, Tunisia and Venezuela. However, this list is largely incomplete and you will need to delve into the specific type of foreign currency regime in force for that particular country. Your money transfer expert will provide you with a more populated list of countries and will be able to explain to you all the details related to a certain country.
A00-280 A complicated situation can occur when a country allows only "reasonable" foreign currency transactions to be conducted. "Reasonable" is a flexible term and unless explicitly specified it will be up to a government official or a designated state body to decide what amount of foreign currency money is a "reasonable" sum. Although only a few countries impose such a restrictive foreign currency regimes, they still exist and you must consider it before sending funds to such a country. Growing number of world governments liberalise foreign currency exchange regulations but taking an expert advice will help you familiarise with all applicable regulations.

A00-211 Becoming a CPA requires a love for organization and numbers. CPA stands for Certified Public Accountant. The average CPA makes around $50,000 a year (for entry level) and the demand for these positions are rising. They are usually certified by the state and required to take an exam. Most people who are in this field will also need to complete a certain amount of education and gain experience before landing their first big break in the industry. Each requirement is different depending on the state, however most people will need to pass the Uniform CPA requirements. Here are some of the requirements it takes to become a CPA:
Education and Credits Needed To Become a CPA
There are different methods available to those who want to become a CPA. The first method is by attaining a bachelor's degree. While attaining this degree, the candidate must also have at least 24 semester units in an accounted related subject. The same amount of credits is needed in the business subject. The other step is to pass the Uniform CPA Exam. An ethics course will need to be taken. It is advised to try to get at least 2 years of accounting experience with a firm that is monitored by a CPA (licensed). This experience will be able to land you jobs.
What It Takes To Be a Successful CPA
A00-212 There are a set of characteristics a person must have in order to be a CPA such as;logical thinking, good at math, strong communication skills (verbal and oral), solid computer skills and ability to synthesize. CPAs must also be good with team work. Many accountants start out working for firms or teams. As you gain more experience, you will be able to be in charge of other departments. It also helps to be tech savvy. Modern accountants are very good at using accounting software such as Quickbooks and Peachtree. This software is ever involving and expanding thanks to the advancement of technology. It may help to take a couple of computer classes while pursuing a Bachelors degree in accounting or other related fields.
What You Will Be Doing As a CPA
A00-250 Most Certified Public Accountants deal with auditing citizens. However, these jobs are not really desired by CPA. The employee will need to be prepared to do this type of work whether they like it or not. It is not the only type of work available to a CPA, however, it does make a big portion of the field. The accountant will need to have a certain number of audit hours in order to gain experience. Accountants can also get the opportunity to team up with other large international accounting firms. This would look great on a resume and it is also a good idea to gain experience. Other jobs offered with this degree include; payroll manager, budget manager, tax specialists and financial reporter.
Other job fields include internal controls, financial analysis and International accounting. An accountant does not have to stick with one type of job. Accountants also are known for starting their own firms once they get the hang of being a skilled CPA.

C_TERP10_65 Debt is an 'incapacitating' financial burden you carry which continues to grow more and more because of the interest payable on the total amount owed. Many never get to fully recover financially with the degree of escalating debts to pay and/or settle in addition to keeping their lifestyles going.
C_TFIN52_65 Financial Debt is a situation nobody desires to enter into but many struggle to get out of by the end of the day. Queer!
Getting out of debt is a constant struggle many will continue to contend with for as long as scarcity of funds and resources continue to prevail at the expense of increasing needs and demands.
Many debt situations arise as a result of overdrawn credit facility with financial institutions such as banks and credit card companies, loss of employment or unemployment, divorce, business failure, falling victim to fraudsters (though in many instances greediness for some free and 'easy-pickings' money contributed greatly to being cheated, swindled or duped), college bills or tuition fees, loans and advances, defaulting on loan repayment, medical, legal, and emergency bills, loss of income, to mention a few.
Knowing what option to choose between debt relief and declaring bankruptcy leaves untold emotional stress in addition to the combined weight of financial indebtedness and bad credit rating on the mind. Taking the future into consideration and the after effects of any choice made pose an additional challenge.
C_TFIN52_05 Becoming debt-free in a world rife with empty promises and hopes dashed is indeed possible. A good start point is to take into account the status of debts owed or one's financial situation. Having this in perspective helps seeing any options or solutions proffered can be carefully considered before any decision to become debt free is taken.

C_TADM53_70 Clipping coupons is back! More and more women are now shaving at least $50 a week off their budget by clipping coupons. There are billions of coupons distributed and only a small percentage is redeemed. This is because when we think about clipping coupons to save money, we think how time consuming and inefficient it is. Nowadays technology has allowed us to take advantage of saving money through coupons via internet and our cell phones.
Start off by getting a coupon organizer. If you're the individual who has the time, scan through all newspapers and fliers that come to your house and clip all coupons to put into your organizer. Consider starting or joining a swap coupon group and trade in those coupons that you know you won't use for one that you will use. Not only will you save money but you'll make new social connections.
C_TADM56_70 If you find you just don't have the time to rummage through papers to find coupons then get online. Register to specific websites (ie pampers) and take advantage of their printable coupons and promotions. Sign up for email alerts through your favourite stores. There is no shortage of online coupon sites that you can visit to download printable coupons.
C_TERP10_60 Using the coupon when the item is on sale is the best way to save money as you're now getting a discount on an already discounted item and you'll pay next to nothing for that particular item. It's genius really!!!
Get to know your stores and your products and jump on the gravy train, you'll be really surprised how effective coupons are in saving you money.

C_BOWI_30 A nine-to-five job isn't the only way to make money. By becoming more financially aware, you could dramatically increase your disposable income. Spend just an hour or so each week putting your financial affairs in order and you could see a big difference in your bottom line. It's all about seeing where you can make savings and how you can get more money coming in.
No-Brainer Ways To Cut Your Bills
If you have a job, then you most likely have a bank account, but have you ever wondered if it's the right bank account for you. Do a bit of research, shop around and you could save a small fortune in bank charges and notch up some extra income in interest at the same.
Think about your credit card in this way too. Could you be paying less interest or even be enjoying an interest-free period if you shift to another card. Again, do a little research and find out what's the best plastic for you.
Likewise, shopping around could help you slash your household bills too. Are there competitors to the utility companies you currently use who would welcome you with open arms and reward you with lower electricity, gas, phone or broadband bills?
C_TFIN52_64 Easy Ways To Make Money
Start saving. If you don't already do so, you should be putting away as much as you can afford each month for a rainy day. Put some of the saving tips in this article into practice and that shouldn't be a problem. However, do make sure that money is working for you. Locate the highest interest earning account available to you and check back every couple of months to make sure that the account you use is still the best value. When you've built up enough, consider investing in safe funds or stocks. Alternatively, if you have debt, use your savings to pay it off. Normally you're paying out more interest on your debt than you earning on your savings so it makes sense to have less debt and more savings.
C_TADM51_70 Your home is another way of making money. If you have a spare room, you could consider taking in a lodger.
Recycle your old technology
There are companies out there that will pay you for old cell phones, laptops and other gadgets, even if they aren't working anymore. So hit the attic and get decluttering.
While you're at it, how about having a garage sale to make money from all that old junk that's in your loft or garage. You'll be surprised by how much people will pay for stuff you thought was worthless. If there's anything left over, try auctioning it off on eBay.
Earn extra money from home. If you're feeling a bit bored, why not put that spare time to good use and earn some extra cash by taking part in some Internet research? There are plenty of companies and websites out there now that will pay you simply for answering a few questions.
Put just a few of the tips here into practice and you'll be well of the way to being a financial whiz.

C_BODI_20 The world is facing the economic slump down. The illustrious Lehman Brothers is into a dire state of misery and as a result America is facing financial threat. This has in turn given rise to inflation and the entire word is left scratching their head that how to handle the prevailing situation?
Some of the major factors that influence inflation are:-
* Monetary Policy
* Fiscal Policy
* Interest Rate
The above factors should be properly dealt with otherwise it can really aggravate inflation.
Due to inflation you have to think number of times before buying the goods and services. Inflation limits your exaggerated buying habits to the basic necessity goods. This prevents you from buying goods and services for a better standard of life.
Now the question is how to maintain balance in fluxing financial transactions, at the same time tackling the inflation? As the prices are increasing and the income is limited what should be done to save your money?
C_BOE_30 Now people don't want to take any chances with their money and want to track all their, income and expenses. They maintain budgets, ledgers and transaction lists that would maintain precise records of their budget. A simple but pragmatic solution to beat the inflation is to use the online money management software. This software helps you take care of your income and expenses and can be of great help to keep a track of your spending.
C_BOCR_08 Many a times your expenditure increases just because you forget to pay your installments at the right time. By the time you came to know about this a legal notice has come from the bank. All this adds to your financial worries. But with the online money management software you get reminders at frequent intervals. Apart from this it's easy to use, equally suitable for personal/business use and above all it give due importance to the most vital factor in today's life "TIME". This software is less time consuming
PL
Online money management can really give some relief to everybody from the constant and frequent price rise!

C_TAW12_70 One way that you may be able to sell your home is by offering the financing yourself. This is not as risky as it sounds, thanks to a new web site that has opened up called 'Virgin Money USA'. Virgin has streamlined a way for ordinary people to arrange loans and it is all explained online in their 'Guide to Seller Mortgages'.
The web site was founded by a fairly well-known British entrepreneur, once an ordinary man in the street, and now in recognition of his business successes, he is 'Sir Richard Branson'. He is the owner of several companies from Virgin Airlines to Virgin cell phones and has now opened Virgin Money, a new Boston-based business.
There was a time, years ago, when seller financing was popular; now re-named 'take back' financing, it is becoming necessarily popular again. With the Virgin Money USA program, everything is negotiable from the down payment, rates and the terms of the loan.
C_TFIN22_64 There is no bank involvement, because it is the seller who is in effect the bank. The owner can collect interest and principal in exactly the same way that the bank does. It is one way of making extra money on your home, if you can afford it.
One of the reasons that this system has not previously been utilized is because of the lack of guidance on how to offer it and remain legally secure from a financial point of view. This has all been taken care of by Virgin Money USA, for a small fee of between $699 for the basic package and $1999 for the closing package. Virgin will offer guidance in helping you to access their comprehensive service.
This includes help and advice with the loan terms, legal documentation for the mortgage note, escrow accounts, title searches and loan closings. They will also do the credit reporting for the buyer and the monthly servicing of the loan, including reminders on late payments.
If this sounds feasible, but you want to feel more reassured, go to the web site of Virgin Money USA and download their 'Guide to Seller Mortgages', which will walk you through the key steps. This business has experienced a 'double digit increase' in the last quarter alone.
C_TB1200_07 Monthly payments from the buyers are received and processed (or chased up) by Virgin Money and from each payment a modest $9.00 charge is siphoned off to Virgin Money for the fee.
As a seller, you and the buyer decide the price, the down payment, how many years and at what rate you will agree to in order to sell your home. Virgin encourages an agreement whereby the seller gets a balloon payment at the end of a specified number of years.
For more information, head over to virginmoney.com/worldwide/

C_BOSUP_90 Although the recession is over, the economy is still far from healthy
By now it was to be hoped that everything would be as it was, but it seems not to be the case, as many are still struggling to make ends meet, and much of this was proven by the fact that many large shops had trading figures of far less than last year when we were actually in a recession.
Even the massive food supermarket group, Tesco, had a profit of.02% less than the previous festive season which might not seem much, but when we consider their huge profits even that drop is significant.
The high street stores sold less this Christmas than last.
In general, at the festive season, the majority of homes in the U.K. have a Christmas tree that is full of bright lights and ornaments. Often people have highly coloured lights in their front windows and often many lights in their garden in the form of Santa Claus, reindeers, angels, trees, etc. that all contribute to a happy atmosphere and environment. These items were not visible this year.
Many people go to restaurants for Christmas and New Year lunch and the tables for these meals are often booked weeks, if not months, in advance.
C_BPX_70 This year was totally different, with many restaurants having large numbers of empty tables, and it was possible to go to almost any restaurant on Christmas or New Year's day with a large group of friends without any prior booking.
All this all points to the economic condition dampening the spirit of the general public with both those who had not enough money to spend as well as the ones who had enough money, all feeling generally depressed
The three years before this Xmas were economically bad, and if even the festive season was not sufficient to make many people feel alive again, it is very worrying.
People must now look forward to the future and forget about being so depressed.
C_TFIN22_05 This would be the time to do the home improvements you have wanted to do to make your home as comfortable as you can.
You also feel that you really want to throw out the gloomy feelings of the Winter, which this year has been especially snowy and cold, and enjoy a month in the sun with your family
All this can be paid for in a very cost effective fashion by arranging a secured loan or a remortgage
Both remortgages and secured loans are loans that only apply to homeowners as they must be secured on the equity of a property. Secured loan interest rates start at 9% and remortgages are available for under 2%.
Their repayments can be spread over twenty five years which make most homeowners able to afford them.
By taking advantage of what remortgages and secured loans can offer, the depression of the recent past will disappear.