What is cost accounting? How to do it? Why? Why? Our guide

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We hear a lot about it, but it is not mandatory. Indeed, legally, you do not need to carry out cost accounting, but in reality, not doing it is equivalent to putting your company at great risk.

Why is that the case? Because it allows you to better manage your company, but also to appear credible to funders or managers during a presentation, by basing your arguments on solid and quantified evidence. So how do we do it? Let us explain everything to you.

What is cost accounting?

Cost accounting is based on general accounting: it analyses the results in order to identify areas for reflection on the costs of a company.

To go into detail, this cost accounting consists in using the results of an accounting year to interpret these figures, and thus help managers to make the best financial decisions for their company.

Why carry out cost accounting for your company?

We have already talked a little bit about it in the introduction, but let us take an example to better understand it. You are an auto-entrepreneur looking for financing to boost your company and establish yourself on the market.

Of course, the first thing to do is to analyse the market carefully, in order to find the requests that are not yet met by your competitors and find your way to these prospects. By targeting your efforts, you can extend your skills to the most promising services. Only your company will only thrive if your customers compensate you for the financial investments you have made to provide the services they have benefited from.

Indeed, you would not sell a product, put a baguette of bread, cheaper than the price that the quantity of flour needed to make it cost, you would not gain any more value. Not to mention the cost of other possible ingredients, but also the use of the oven, space heating, the cost of the person you may have hired to help you, etc.

Cost accounting looks at this: your profitability. Where do your efforts pay off most? Is there a financial interest in employing another person to support you? Should the price of your wand be lowered or increased? Specialize in making cakes because you make more sales, or in pastries, on which you earn a better margin?

Cost accounting gives you reliable leads on which to base your decisions to make the best decisions and increase your turnover.

How to do your own cost accounting?

When a contractor starts out, he or she usually simply calculates the cost of a service by himself or herself in relation to what it cost him or her based on the result of his or her general accounting. However, regardless of the size of your company, you are not required to carry out cost accounting by yourself: IT tools exist for this purpose.

The advantage of software is that it does not make calculation errors, and requires you to have a certain rigour that prevents you from forgetting hidden or other costs. In addition, most have storage space to centralize files and prevent you from losing important data.

Even the smallest accounting tools generally have an analysis function to generate reports and statistics. We advise you, if you are starting your own business, to consult this article: “I am starting my own business, what are the software programs to do its own accounting?

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