While you may wish it was that easy, the truth is that you can't let your business run on autopilot and expect good results. Every business owner knows you need to make numerous adjustments along the way. So, how do you handle the array of questions facing you? One way is through cost accounting.

Cost accounting reports and determines the various costs associated with running your business. With cost accounting, you track the cost of all your business functions - raw materials, labor, inventory, and overhead, among others.

Cost accounting differs from financial accounting because it's only used internally, for decision making. Because financial accounting is employed to produce financial statements for external stakeholders, such as stockholders and the media, it must comply with generally accepted accounting principles (GAAP). Cost accounting does not.

Cost behavior. For example, will the costs increase or stay the same if production of your product goes up?

Appropriate prices for your goods or services. Once you understand cost behavior, you can tweak your pricing based on the current market.

Budgeting. You can't create an effective budget if you don't know the real costs of the line items.

To monitor your company's costs with this method, you need to pay attention to the two types of costs in any business: fixed and variable.

Fixed costs. Fixed costs do not fluctuate with changes in production or sales and include:
1.rent
2.insurance
3.dues and subscriptions
4.equipment leases
5.payments on loans
6.management salaries
7.advertising

Variable costs. Variable costs do change with variations in production and sales. Variable costs include:
1.raw materials
2.hourly wages and commissions
3.utilitiess
4.inventory
5.office supplies
6.packaging, mailing, and shipping costs

Contributions to a traditional IRA are made pre-tax, which means distributions are considered taxable income; however, the tax is paid upfront with a Roth IRA, and distributions are completely exempt from income tax. This feature makes converting a traditional IRA to Roth IRA and rolling it over to an heir an attractive option, especially during a financial crisis. The conversion is treated as a rollover where the trustee of the traditional IRA is directed to transfer an amount from the traditional IRA to the trustee of the Roth IRA. The account owner pays income tax on the amount rolled over in the year the account is converted, which allows the account to accumulate assets tax-free and future distributions are tax-free.

To learn more about these and other tax strategies related to wealth management, please call the office and speak to a tax professional who can assist you.

If you'd like to understand the ins and outs of your business better and create sound guidance for internal decision making, consider setting up a cost accounting system. If you need assistance with this or any other matter related to ensuring the financial success of your business, don't hesitate to call the office to schedule a consultation.