5 Tips to Successfully Implement Standard Costing

Standard-CostingYou may feel that it is time to make use of your ERP software’s automation to quicken the pace of closing out your books at month-end and to maintain your perpetual inventory value. Regardless of whether you pursue standard or actual costing in your manufacturing plant, there is no doubt that implementing costing is critical to understanding where your money is being made and lost on the shop floor.

You might be anxious to use standard costs to prepare your budgets and set benchmarks to compare to actual costs. In turn, you can gauge how close you came to your initial estimates of costs when quoting a job. There are several such advantages to implementing standard costing and we want to see you launch this costing method successfully. Let’s look at some things to consider when implementing standard costing within our manufacturing ERP and MES solution, EnterpriseIQ.

Understanding the Standard Costing Implementation Process

No. 1: Proper planning
Don’t underestimate the time it takes to implement costing. To start, IQMS offers extensive help files that should be viewed as reference files. Alternately, spending time with an IQMS professional can save you at least three times the amount of internal man-hours consumed when you can clear up misconceptions within a handful of training hours. Determine what type of assistance works best for you and your organization. You can engage in a Professional Services consultation, attend our Accounting classroom training and/or utilize our web-based training options.

No. 2: Understand your learning style
Do you learn by doing? Great! Coupled with adequate training, a sandbox is the perfect tool for working through standard cost processing. Let’s not try the “What does this button do?” approach on your live production data. Use your IQTrain (AKA IQTEST) database instead. Don’t have one? Get one!

No. 3: Determine your ultimate goals
Is your goal to do job costing? Is it a hybrid method you are looking for? Job costing information can be collected with costing setup but without actually booking to the general ledger. You can still function using the periodic inventory system while obtaining your perpetual inventory costs and job cost analysis.

No. 4: Include operations in your implementation
EnterpriseIQ is a comprehensive, extended ERP and MES system, meaning that every aspect of your business is interconnected. So spend some time with your director of operations to understand what type of EnterpriseIQ manufacturing processes you have adapted. Different methods can change the timing of when data is posted to the ledger as well as how costs post. You will also come to understand what variances are reasonable versus unreasonable.

No. 5: Post implementation
You have your job costs and variances, now what? You have “flipped the switch” and now is the time for additional support. Let’s evaluate the data together. Bring your IQMS Professional Services Group consultant back onsite or schedule an Internet-based training session to assist you with month-end inventory reconciliation and analysis of variances to spot items or processes that require attention.

Implementing costing in your manufacturing facility doesn’t have to be an arduous process. With the right tools and support, such as training, Professional Services, a test sandbox and a well-thought-out game plan, you can begin realizing the benefits of standard costing in no time.

Next Post:
Previous Post:
This article was written by
Melissa Bodillly
Website: IQMS

Melissa Bodilly, IQMS Training Specialist, is primarily tasked with teaching IQMS customers how to more efficiently utilize their ERP solution. Her in-depth knowledge of the software, combined with years of experience helping manufacturers get up to speed, makes Melissa an invaluable resource.