Cost Accounting

Cost Accounting

Defining Cost Accounting

Cost accounting is a kind of accounting which targets to record a firm’s price of production by analysing the price at every stage of production also fixed expense example, depreciation of machineries. This method calculates cost individually first and then compare it with actuals for measuring finances of the firm.

Explaining Cost Accounting

Financial accounting is basically used for or by other companies to judge a company whereas Cost Accounting is used for a companies’ internal purpose. Financial accounting is also a showcase of financial results that also has a company’s liabilities and assets. This process can be extremely important as a key for administration in finances and in starting cost control regulations that can improve total profit for the firm in future.

One main change between financial and cost accounting is that the cost is a secret in financial accounting (in most cases), cost accounting is assigned a cost according to the administration Cost accounting, die to it is used as an company tool by administration, don’t have to set any particular regulations and is fixed by the general principles and hence its value may differ from place to place.

Development of Cost Accounting

It has been said that cost accounting was discovered and used during revolutions of industries when the incresing demand compelled industrialists to think whether to reduce the cost of their over stocked products or decrease production capacity.

In the early 19th century when T. R. Malthus and David Ricardo were discovering the topic of economic theory, writers such as Charles Babbage were on their first books written to show businesses world on how to manage internal cost accounting.

Types of Cost Accounting

  1. Standard Cost Accounting
  2. Activity Based Costing
  3. Lean Accounting
  4. Marginal Costing
Credit Decisioning Process

Credit Decisioning Process

Equipment  finance has long been defined by complicated and varied credit and origination processes requiring individual attention and hands-on processing. Today, that industry hallmark is undergoing a major shift — as front office automation is streamlining credit decisioning  and driving dramatic changes in business models and company cultures. AgStar Financial Services is one company leading the charge in embracing automation and the Web to prevent paper-based manual processes from limiting its growth potential.

“We have a vision  characterized by complex, unique transactions. In the past, our workflow and credit decisioning processes were mostly manual — and included more than 50 separate steps generating up to 15 documents and requiring as many as eight people on a single deal,” said Kari York, Team Leader, Lease Operations, AgStar Financial Services. “But we are redefining our company from the ground up, and we’ve greatly improved and streamlined operations through front office automation. AgStar is now processing more transactions than ever — by delivering near instantaneous credit decisions and using technology to efficiently manage an increasing transaction volume,” said York. AgStar Financial Services, established in 1917, provides financial services to agricultural-related enterprises and rural America.

As one of the largest Farm Credit Associations in the nation, AgStar has more than $2 billion in assets and 15,000 clients and provides a full range of services from loans, leases, crop, life and disability insurance to financial consulting, record keeping and tax services. Today’s AgStar is taking on business it once couldn’t handle — resulting in a record 38 percent increase in booked lease transactions in a single year, without adding any new human resources. With front office automation technology, AgStar has so significantly improved its operations and credit decisioning processes, the company anticipates doubling its annual lease volume both directly and through dealer/partner programs

Cost Benefit Expectation

Cost Benefit Expectation

Finance Center is integrated throughout the unit’s credit process – branch (customer) notifications of status changes are automated, document orders pre-fill with customer information, and error rates on document orders have declined from a high of 75% under a manual process to 5% today. “In addition to conversion benefits, Finance Center enabled us to integrate three sites into one workflow and shift work based on available capacity. Service and support functions are terrific,” reports Debbie.

“The implementation of Finance Center represents a paradigm shift for the bank in many ways. It was an important component in enhancing the perception of the department to one that is customer focused and branch friendly. Communication between back office business partners focused on how to best process applications on Finance Center carried over to identifying efficiencies in non-Finance Center tasks.

Last and most important, the cost benefits actually exceeded the high threshold expectation set by executive management.”

Benefits

• Reduce credit risk.

• Streamline processes.

• Track quotes and generate reports.

• Integrate systems to create a single point of access.

• Go quickly to market with new credit management products.

• Leverage and strengthen the bank brand through private labeling.

Commercial Lending Streamlining

Commercial Lending Streamlining

Bank of the West Streamlines Commercial Lending By Mary Norton-Miller Bank of the West ($27 billion), San Francisco, CA has undertaken an aggressive expansion campaign as evidenced by their branch network growth from 40 branches twenty years ago to some 300 branches today. Rapid growth forced the need for scalable online business finance origination at the branch level. Customer service objectives focused on how to increase efficiencies and shorten processing times for loans and lines of credit.

Implementation of CapitalStream’s FinanceCenter, a financial front office automation solution was completed in May 2002 at Bank of the West BusinessLink Unit. Offered in two delivery models, installed or hosted, Bank of the West selected a hosted solution because it provides access to cutting edge technology and capacity without straining internal resources.

FinanceCenter is currently used for all BusinessLink commercial credit transactions, mainly for small and medium-sized businesses. Types of loans and lines serviced by BusinessLink include unsecured and secured revolving lines of credit, term loans, and real estate secured term loans (mini-perm), in addition to underwriting commercial credit cards and ACH exposure.

System Reengineering

System Reengineering

Documenting our new process was the most time consuming part of the project, but the most valuable as it forced us to question each step and allowed us to eliminate redundant practices.” The bank was able to add the nearly 100 branches acquired with their United California Bank acquisition last summer in record time. BusinessLink was one of the first groups to complete their conversion tasks. They have designed their application to also function as a training tool, making it more readily accepted by new users.

How FinanceCenter Works Each branch logs into FinanceCenter on Bank of the West’s intranet to submit applications, download supplementary materials, and check on the status of existing applications. 1.An application for each product offering is completed and submitted electronically by branch personnel or web application, call center, equipment vendor, etc. 2.Automated Credit Workflow takes over. 3.Credit data is requested based on rules configured by the bank. 4.The transaction is assigned to an underwriter for review based on the application and credit data. 5.Notification is sent to branches via email as the transaction progresses through the process. 6.Near real-time reports can be generated on all financing activities. 7.

The entire process routinely takes less than a full business day. Credit decisions can be immediate when all information is available or routed automatically to the appropriate person for review.