Cost management what is a business? Include the account? Controlling the effective circular 200

One of the paradoxes popular that many businesses encounter as revenues steadily increased through the states, but gains disproportionately even tends to decrease. When in-depth analysis, the cause often lies not in the market or sales activities, which come from cost management business increased, but not tightly controlled.

Many businesses fall into the state apparatus, ballooning, high administrative costs, lower performance, but are not recognized because of the lack of system analysis at a reasonable cost. Meanwhile, with the business strategy, financial clarity, understanding the control of good cost management not only helps to save the budget, but also improving the efficiency use of resources contributes directly to growth, sustainable profitability.

This article Lac Viet Computing will provide the information from platform basic to in-depth cost in business management from concept, structure prescribed current accounting, the flaws common to the optimal control effect using modern tools.

1. Cost management what is a business?

1.1. Definitions easy to understand by management accounting and financial accounting

Cost management business is the account of expenses incurred related to the organization, administration and management, general operation of the business. This is the group costs not directly create products or revenue, but plays an essential role in the maintenance of the machine operation efficiency, especially in the departments as administrative, hr, accounting, legal, board of directors...

As prescribed in circular no. 200/2014/TT-BTC, cost management business is accounted for in TK 6422 is one of the three main costs (besides the cost of sales, cost of production and business).

Distinguished from other types of costs:

• Cost of sales is the account directly related to the operations consumed products such as marketing costs, commissions for sales staff, shipping delivery...
• Production costs associated with the process of creating products includes raw materials, direct labour, cost of joint production.

For example illustrated easy to understand: the salaries of accounting staff, rent office work of the executive departments or cost software for hr management are the management costs. Meanwhile, gasoline delivery, or money advertising on the social network will be classified in cost of sales.

The identification of clear cost management not only helps accountants accounting accurate but also help management assess the true performance using administrative resources, from there make a decision to cut investment or reshuffle the more reasonable.

1.2. Role in the cost structure overall

Cost management business often accounts for a considerable importance in the cost structure common, especially in the business activity in the service sector, educational, financial or other large scale company has the administrative apparatus voluminous.

In business consulting, technology, cost of production is not significant because there is no manufacturing process physics, but management costs include wages for our team of project monitoring, the cost of rent, office, software management work can occupy more than 30-40% of the total operating costs.

Affect business performance:

• If not, better control, cost management can become “the burden potential”, quietly eroding profits, especially in the context of market volatility or declining revenues.
• On the contrary, a management system, streamlined, efficient, less layers, but stable operation can help businesses save hundreds of millions per month, funds can be reinvested in product development or market expansion.

From the perspective of financial management: Cost management is not “cost need to cut as much as possible” which is the required optimal under reasonable rate in comparison with the scale of operations and performance to create value. Close monitoring of the proportion of this cost over time, compared with the revenue or gross profit will help the business identify timely signs “ballooning unnecessary” and strategically align accordingly.

2. Cost management business, what to include?

After understanding the cost management what is enterprise, the next step businesses need to understand is that cost management business, what to include, how accurate classification to serve for the purpose of accounting, analysis, cost control efficiency. As prescribed in circular no. 200/2014/TT-BTC of the Ministry of Finance, the account management expenses are accounted for on account 6422, can be divided into groups as follows:

2.1. Cost management business circular 200

Follow the instructions accounting, cost management business, including the costs service for operations, administration, serving the business. Specific:

• Cost of salaries, bonuses, social insurance of the division management: including staff salaries, administrative director, the chief accountant, the legal department, human resources, administrative...
• Office expenses: includes electricity, water, phone, internet, office supplies, food, tools and service management activities such as printing machine, desk, chair, computer...
• Cost of services: these services include accounting, auditing, legal advice, management consulting, business protection, office cleaning...
• Cost of living, per diem, conferences and training: includes the cost of invited guests, work of the executive committee, held a workshop internal or appointed officials and school advanced professional.
• Depreciation of fixed assets service parts management: For example, photocopiers, air conditioning, office equipment, catering for departmental administration.
• Provision for bad debt: Is account provisioning for doubtful debts arising from commercial transactions.
• Taxes, fees and other expenses executive service: includes the account management expenses incurred other not belonging to the group above, but still serve the general manager.

The correct classification full help businesses comply with regulations, accounting at the same time serving cost analysis more efficient from which it can plan, cut, distribution, or adjust as necessary.

2.2. Examples illustrate the fact for each group cost

To avoid misunderstanding or mis-categorized, here are some specific examples to help businesses easily visualize cost management business, what to include:

• Cost of rental management software hr for hr manager is expense manager because this is software, service management, internal and not related to sales or production.
• Salaries for staff accounting, hr, administration is the management cost, but wages for employees business was accounted for in cost of sales.
• Rental cost audit report of financial year, or the cost to hire construction consultants ISO process, is the cost management because the objective of commissioning, operating and financial transparency.
• The cost to repair the computer of the director or the cost of buying stationery for board of directors, is also the cost of managing the business if they serve the purpose of general operating.

Note: Some errors are common pooled all costs not produced in the cost of sales, causing financial reporting inaccuracies make it difficult to analyze the efficiency of each department.

3. Principles recorded accounting cost management business

For effective control, to avoid confusion in accounting to ensure compliance with accounting regulations, current business need to understand the principles noted accounting cost management business circular 200. The recognition accuracy not only helps to faithfully reflect the real cost in the states, but also the important basis to analyze the efficiency of operations management, risk-free settlement tax audit.

3.1. How accounting circular 200

Under circular no. 200/2014/TT-BTC, the entire management costs recorded in account 6422 is sub-accounts belonging to TK 642 – Cost management business.

Principles recorded

• Recorded according to actual cost: Only those expenses actually incurred are related to the operations general manager of new business are recorded.
• Allocate the correct accounting period: The upfront costs, many states, such as office rent prepaid management software pay per year... must be allocated gradually over states to ensure no deviations business results in each year/quarter.
• Must have full valid documents: Invoice finance, contracts, payroll, commissioning records, allocation table... is grounds accounting – tax to acknowledge the true cost.

A number of cases accounted typical

• Wage costs, administrative division – hr, accounting, senior management:
  Debt TK 6422 / Have TK 334 (To pay workers)
• Depreciation of fixed assets used for management purposes (such as photocopiers, office equipment):
  Debt TK 6422 / Have TK 214 (depreciation of fixed assets)
• The cost to outsource management services (rental, consulting, accounting software, lease audit...):
  Debt TK 6422 / Có TK 331 (Must be paid by the seller)
• The cost of stationery, electricity, water, internet for the office block:
  Debt TK 6422 / Có TK 111, 112, 331...
• Cost of living, the cost of leadership, administrative office:
  Debt TK 6422 / Có TK 111 or 334 (if advance)

The accounting help accounting business determine the right cost management business what's included and noted a clear, transparent in every content detail.

3.2. Errors frequently encountered when the recorded cost management

In fact, many businesses, especially medium enterprises/small still recorded wrong or not clearly distinguish where is the cost management business is what led to the financial reporting is not accurate, affect the analysis of operation efficiency as well as risk in the tax inspection.

Confused between cost management and cost of sales

• Common mistake: Remember the entire personnel costs non-production (administrative staff, sales staff, customer care...) in a category that does not separate properly.
• Consequences: When the financial statements do not show right ratio of cost management – sales – production, managers will not determine is where is “the leak” the true cost.

Solution: set the clear division, allocation of expenses by function (manager – sales – production) to ensure transparency.

Gross expenditures not valid on cost management

Some businesses have a habit of “pushing” the expenditures teen invoice not qualified deducted TK 6422 that easy to “hide on general expenses”. However, cost management, business circular 200 accepted only when there is enough evidence from clear about the purpose of use.

• Example mistake: the Cost of buying gifts for partners, but there are no contracts, bills – still put on cost management.
• Consequence: can be eliminated when tax settlement, causing the risk of arrears of tax, take reasonable cost is deducted.

In summary, the accounting exact cost management business what's included in the correct circular 200, along with avoiding mistakes common in practice will help your construction business is an accounting system transparent meet the standards of financial support for the cost management and decision-making executive.

4. Analytical cost management business: how to evaluate the effectiveness?

Understand the cost management what is the business cost and business management, including what is just the first step. To actually use cost information as a management tool for businesses that need to know how to analyze, measure, evaluate the effectiveness of expenditures this. The analysis of cost management the right way to help identify early those points unreasonable, from which the optimal spending without affecting operational efficiency.

4.1. The index to track: % management expenses/revenue, growth rate over time

One of the most basic indicator that businesses need to track is the ratio of the cost management business/net sales. This indicator reflects the level of detail for the machine operating against the possibility of generating revenue.

• Expense ratio management/revenue, higher business as the need to review the operational efficiency of the management apparatus, especially the administrative costs do not create value directly.
• Compare cyclical: The track this index over the quarter/year will help to detect trends, costs are rising or be controlled better.
• Comparison with industry standard (benchmark): Each industry has different characteristics enemies on the proportion of costs. For example, industry consulting services normally cost higher management manufacturing sector. Comparison with the industry will help the business reviews are at the level of “normal,” “effective” or “over the limit”.

4.2. When management fees are reasonable?

No absolute figures for the question “cost management business how much is reasonable,” because it depends on:

• Scale organization: the Business gets larger, the management will be more complex, entail high administrative costs more. However, to ensure that the levels increase the cost lower than the rate of revenue growth or profit.
• Operation pattern: production Enterprises usually have low management cost, more business consulting services.
• Indication of cost management is “ballooning” unreasonable: Increase quickly, but not in proportion to revenue growth; the Number of personnel administrative much, but the efficiency of work is not clear; Many expenses, small odd not transparent, difficult to follow in parts.

Proper analysis cost management not only help optimize financial, but also the basis to re-structure the organization, allocate resources effectively enhance competitiveness in the long term.

5. Controlling the optimal cost management, business

After analyzing detection problem, the next step is to optimize cost management that still ensure operations are not interrupted. Below is the solution that businesses can apply immediately, regardless of large or small scale.

5.1. Periodic review of the accounts, fixed and flexible

One of the important principles to control the cost performance is evaluated periodically according to the department, a clear distinction:

• Fixed costs: such as payroll management, office rental...
• Flexible expenses: such as receptions, work free, outsource...

The grouping helps clear the set limit spending for each department. At the same time, the executive board may apply the policy of “browse threshold” for expenses irregularities, thereby minimizing the costs incurred do not control.

5.2. Application software to digitize internal processes

One of the reasons that management costs ballooning is caused by too many manual processes, lack of automation to use more personnel administration to handle the job repeat.

Business should each step of the process of administration such as:

• Single from brazil on holiday, shopping suggestions, approved by the
• Task management, internal progress report
• Archive documents, the contract documents

Value received:

• Minimize printing costs, personnel handle profile
• Shorten approval time, faster decisions
• Increase transparency, easy to test, easy to trace

Businesses are looking for a solution set, it can consider using LV-DX Dynamic Workflow or AccNet ERP. This is the two software due to Lac Viet developed to help businesses automate the entire process, internal control operating costs effectively.

Feature highlights:

• Track control cost, according to each department, each item
• Warning exceeding the budget in real time
• Expense report management by states, comparing actual and planned
• Decentralized clear, approved flexibility, reduce processing time

Sign up for a free demo at: https://lacviet.vn/lv-dx-dynamic-workflow/

5.3 integrate AI into cost analysis, corporate finance

In the context of financial data increasingly numerous and complex, the analysis cost management method on Excel no longer meet requirements decisions quickly and accurately grounded. That is why many businesses are choosing to switch to the tools of financial analysis integrated artificial intelligence, in which LV Financial AI Agent of Lac Viet is the solution is designed specifically to support businesses track, analyze comprehensive review of the financial indicators, which can cost management business.

The value that the business will receive:

• Automatic analysis of the proportion of management costs in real time, according to the department, or according to each period (month, quarter, year).
• Comparison of cost management with revenue, profits, industry to evaluate the level of efficiency or unusual.
• Warning when the cost exceeds the budget, or tend to an abnormal increase through each cycle, helping administrators timely decision to adjust.
• Create visual reports with charts, tables and trend charts to help the leader board to track, presented in the strategy meeting.

Try it now analysis tools smart financial at: https://lacviet.vn/lac-viet-financial-ai-agent

Understand the cost management what is a business cost, business management, what to include, how to properly accounted circular 200 not only help businesses comply with legal but also is the foundation to build a financial system, the transparency effect. When management fees are reasonable control, business will minimize the waste of resources, improve performance operating optimize profitability in the long term.