Updated: 16/03/22
Analytical accounting is a tool that allows for an in-depth study of a company's revenues and costs and, therefore, of profits, in order to calculate the profitability of the products and services offered and to be able to make the most appropriate decisions.
Read on to find out in detail how analytical accounting can help your business.
What is cost accounting?
Analytical accounting are those techniques that are carried out within a company to study how the income and costs of each line of business (product, department, customer...) are distributed. The ultimate objective of internal accounting is to generate valuable information that allows a internal survey and to be able to make better and more convenient business decisions. A good analytical accounting practice will give companies a competitive advantage from a strategic point of view.
Analytical accounting and financial accounting should not be confused, as record keeping in financial accounting is fully mandatory, but not in the case of analytical accounting. The main difference between the two techniques is that financial accounting takes place in the external environmentThe company's own records, i.e. records that affect the company, but also suppliers, customers, the tax authorities and other third parties, while the analytical accounting has a internal character.
Also, while financial accounting looks at the company's finances on a general and annual basis, cost accounting looks at a specific situation over a specific period of time.
How can analytical accounting help your business?
The analytical accounting can help your business in different ways. Take note of its two main functions:
Analysis of the results of the company or of a part or project within the company.
As an internal, non-compulsory exercise, cost accounting allows the analysis of revenues and costs of any part of the company and can be adapted to the needs of the management at any time.
Decision-making.
Once the analysis exercise has been carried out, which includes an exhaustive exercise of recording the operations carried out, as well as the values and obligations found in the documents and accounting books, the company's cost information is also analysed for internal use, as this will provide the necessary information to understand the company's context, and thus be able to make decisions that are transcendental for the business.
In other words, cost accounting is another perspective and a further support on the financial status and situation of the part of the company you want to improve.
Some of the areas that can be influenced by cost accounting are:
- Product launches.
- Pricing.
- Purchase and sale of machinery and production services.
- Recruitment of qualified staff.
- Changes in organisational hierarchy and organisation chart.
Therefore, the analytical accounting is an important tool that helps companies to develop and grow thanks to the knowledge of all its areas, which allows to make important business decisions that lead to a better understanding of the business and a better control of internal costs. Therefore, in the long run, it will provide a competitive advantage by improving the company's productivity, profitability and efficiency.
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