It’s no debate that the world is becoming increasingly globalised and its impact on small businesses doesn’t go unnoticed. Regardless of the size of a business or where it chooses to operate, one necessity remains constant, and that’s the need for accurate costing.
Without meticulous attention to cost information, a business would put itself in a very volatile position. It is imperative for a business to track costs carefully so profit can be accurately calculated against it in each period — this lets a business know how well they are doing. In addition, accurate cost data allows a business to sculpt well-informed foresight to make future decisions.
Costing your goods
For example, if you are running an international business importing goods from Asia, you will undoubtedly have to work with a shipping company. Currently, uncertainty around freight costs and port charges can be problematic for importers as freight costs are subject to a few factors. This creates a barrier for the business to maintain accurate costing when its final costs are not only delayed, but often subject to change.
Businesses need cloud-based inventory management software that has purchase order recosting capabilities so they have the flexibility to add freight invoices as they come in.
Real-time accurate costing
The problem lies within the static data. Freight companies, like many others, are vulnerable to constant price changes. Older software used for quoting and shipping cannot often cope with rapid changes in prices such as fuel or port fees. Consequently, this type of pricing module becomes quickly outdated.
This is where real-time data comes in handy. Cloud-based software that operates with real-time data can work with a freight company alongside a specific shipment. As a result, a more accurate price can be delivered in real-time. This technology can manage the previous uncertainty and keep users’ records accurate.
Now, with accurate cost information, a business can run much more effectively and offer more competitive pricing.
Making good choices
Accurate costing also allows a business to make optimal choices. Cost is a very influential and the implications could weigh heavily on a business if they base decisions off inaccurate cost information.
Accurate costs also impact the measurement of gross margin. The cost of goods sold expense is dependent on producing the correct data for product costs. When this calculation is off, it directly impacts the gross margin calculation and as a consequence, your balance sheet.
Recording all costs correctly and finding appropriate software to manage and mitigate inaccuracies will help keep a business going in the right direction.