The success of a large number of global business may hinge on the performance of supply chain companies. The need for robust, healthy supply chain businesses is usually due to offshore sourcing, a global marketplace, and foreign competition.
Supply chain company accounting focuses on increasing inventory velocity, minimizing costs, and compressing cycle time. Doing this well takes creativity and ingenuity by supply chain company CPAs or individuals well versed in best accounting practices for the industry.
Supply chain company accounting typically addresses the way companies treat and recognize logistic costs. GAAP is the touchstone that supply chain company accountants use for their international and domestic accounting. It makes it possible for multiple companies within the supply chain to create reports that approach financial information and data in the same way. It should enable multiple companies to create a financial snapshot that is consistent. Thus, making it easier for supply chain companies to analyze data and make needed comparisons.
Why should Supply Chain Company Accounting processes Be Forward Thinking?
Many traditional accounting measures have an extensive history dating back to the early parts of the 20th century. These were created with a focus on domestic sales, production, and sourcing.
Modern supply chain company accounting usually requires a more robust approach that is based on financial performance metrics that can be recognized in the boardroom and that align with the company’s strategic plan. That being said, financial metrics may have a limited application when determining or attempting to improve the overall health of a supply chain company.
For example, inventory yield maximization, inventory velocity, and inventory turns generally represent the best way to receive returns on inventory and the capital that said inventory represents. The time it takes from order purchase to sale, also known as the cycle time, is another indicator of a supply chain company’s performance and can impact the bottom line. However, none of these are measures that traditional accounting takes into consideration. Here at Fusion CPA, we have a team of progressive thinking supply chain company CPAs who have a firm grasp on proven accounting procedures. We can help you address the needs of your customer-focused supply chain company.
Activity-Based Costing For Supply Chain Companies
For some supply chain companies, cost accounting practices are relics of the past that do not work with their new way of doing business or business model. Activity-based costing has allowed many supply chain companies to adapt to our new world’s way of doing things.
Activity-based costing assigns a cost based on the activity. It pinpoints activities in an organization and assigns a cost to them based on the resources used for said activity. This requires breaking processes down into activities and then analyzing the resources consumed by each activity.
Activity-based costing revolves around the concept of a resource driver. The cost driver is the activity that influences or causes the cost. Once that’s identified, sub-processes should be found to help give a full picture of the cost of different activities taken within a supply chain company. Activity-based accounting may help address several problems caused by traditional cost accounting systems that use volume as a metric. The end result could be improved business profitability.
Financial Assistance Tailored to Your Needs
We at Fusion CPA prides ourselves on having in-depth knowledge of the accounting challenges supply chain companies face. Our accountants understand that you face customers who demand increasing fast delivery options, increasing fuel prices, and changes to tax laws that impact your industry. For this reason, we have created proactive financial advice designed to help stretch your profit margin, improve your supply chain company tax planning strategy, and help you eliminate inefficiencies. Could your supply chain company benefit from streamlined bookkeeping, cash flow forecasting, and audit services tailored for your needs? If so, we're here to help. You can learn more about our services by clicking the button below to schedule a complimentary discovery call today!
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