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Road to Standard Hosting

Road to Standard Hosting

While Standard Costing remains an aspiration for a lot of companies, the journey to get there is a long one. In enterprises, processes play a big part in ensuring the success and adoption of technologies. Standard Costing is a long drawn journey but if undertaken could fix a lot of downstream process related gaps and bring in consistency. Standard Costing is a classic example where the journey matters more than the end itself. And the journey is not one directional but more of a circular one as the end output might continue to drive more process efficiencies and then bringing in more efficiencies to the costing process. The road to standard costing involves the 6 steps below in general
1. Bring in ERP Ledger Control – Basically this would help in fixing erroneous data from entering into the Financial System of Record. This is the first and most important step in the costing journey

2. Costing Consistency – This step ensures all the costs are accounted, accrued on time and have a proper trend.

3. GAAP Aligned Accruals - Any large cost that has a frequency of more than a month (Quarterly/Yearly), needs to have proper GAAP aligned accrual schedule to ensure monthly consistency.

4. Benchmark to Industry – Once all the costs are accounted, accrued properly its important to begin the benchmarking exercise of all the Financial Elements. This begins with smallest cost to the largest cost group and how they align with the industry in general. This will give an initial indication of the road ahead

5. Measure the Gap – This involves understanding how off we are from the Industry standard and also the key competitors.

6. Bridge the Gap – This involves identifying key KPIs that drives the performance of companies and aligning them to the Standard Costing process. The process of bridging the gap might necessitate fixing some ERP related gaps as well which makes the whole process iterative

This whole process of defining the Standard Costing baseline, and the consistent fine tuning can be done effectively using strong Enterprise Performance Platforms like QuarkCube as they offer means not only to define the KPIs that drive standard costing but also to consistently measure and monitor them.

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