Cost Effectiveness and its Importance

Do the benefits of providing a service or product outweigh the costs? How efficient is a particular process? Which is the most cost effective method of doing a job?

To stay competitive and profitable, all of these questions need to be asked and answered in the every-day running of your business.

Today, I would like to look at each of these 3 questions in a bit more detail:

1. Do the benefits of providing a service or product outweigh the costs?

Doing a cost-benefit analysis will answer this question. A cost-benefit analysis can be done on either an individual product basis or on a project basis.

Doing a cost-benefit analysis weighs the total expected costs against the total expected benefits and provides estimates of the costs and benefits PRIOR to implementing a service or producing a product.

The process may uncover unexpected costs as well. A cost-benefit analysis can help a company set priorities where resources are limited.

2. How efficient is a particular process?

Efficiency analysis is the process of analyzing how efficient a current process is and from this analysis determining areas where improvement or change may be necessary.

3. Which is the most cost effective method of doing a job?

Cost effectiveness analysis is the process of comparing resource allocation alternatives to assist in determining the most effective and/or least expensive way to produce something or attain a particular beneCost effectiveness analysis is also used to measure the financial cost of arriving at a specified outcome. If something is dubbed “cost effective” it is considered to be good value.

Cost effectiveness analysis supports objective decision making. It is often used wherever resources are limited.
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Tracy Wright,CMA
Tel: 250-470-8421
mailto: tracy@wrightwayconsulting.ca
http://www.wrightwayconsulting.ca/

Why Is Cost Accounting So Important?

There is more to accounting than accounting. Cost accounting is something a lot of business owners rarely think about.

I believe that if more companies had better cost accounting we wouldn’t have the issues we have in the downturn in the economy today. Businesses that understand cost accounting do well in these economic times and are more profitable than their competitors. Too often companies don’t realize they have a problem until it is too late to do something about it.

Cost accounting is a specialized branch of accounting, which involves classifications, accumulation, assignment and control of costs.

The use of cost accounting concepts and practices is required for a company to be successful. Cost accounting helps managers make better decisions by providing key information for planning and controlling. Cost accounting assists with measuring performance, determining costs & prices for goods or services, reducing costs, managing costs, and analyzing the benefits of an activity or process.

Companies need to measure their costs and then understand the behaviour of those costs over varying conditions such as changes in the volume of goods or services produced. Once this has been done, the costs can be assigned to the items produced or services provided and the profitability of each can be determined.

Ensure your company survives, and thrives, now by improving your understanding of your costs.

“If you can measure it, you can improve it.”

Tracy Wright,CMA

Tel: 250-470-8421

mailto: tracy@wrightwayconsulting.ca

http://www.wrightwayconsulting.ca/

About Tracy Wright and Wright-Way Consulting

Tracy Wright is a Certified Management Accountant in Kelowna with eighteen years of experience in Management Accounting & Cost Accounting. Tracy also has a Business Administration diploma, a Major in Accounting ’with distinction’.

The first five years of Tracy’s career were in the truck manufacturing industry, where she performed numerous and various cost accounting functions, and was responsible for the analysis and forecasting of truck margins. The former ensures accuracy in option prices, and the latter ensures continued profit realization.

The next eleven years were spent working in Kelowna for one of Canada’s largest producers and distributors of craft beer, premium wines, and spirits with annual sales of approximately $40.0 million where she was responsible for all areas of cost accounting, as well as assisting with the management of inventory & contract packaging. She worked very closely with the production team in determining the standard cost of all products, as well as spearheading the production budget each year.

Since then, Tracy has been offering her specialized area of cost accounting skills to her clients as a consultant in Kelowna and the Okanagan.

At the present time, Tracy Wright is the only freelance cost accountant in the Okanagan Valley and believes that all businesses can benefit from some form of cost accounting. Tracy is passionate about cost accounting.

Tracy is also a Marketing Strategist for Drake Wellington, a company that helps people restructure their mortgage based on extremely efficient European lending styles. They allow a person to pay off their mortgage in as little as half the time, all the while making a portion of these payments qualify as tax deductions.

Tracy volunteers as Secretary for Viva Musica, and as Treasurer for her synchronized skating team, Skate of Mind. Tracy is a member in good standing with the local Kelowna Okanagan Business Referral Group Chapter and the Kelowna Women In Business.

Tracy services the Okanagan regions of Kelowna, Penticton, Vernon, Oliver and Osoyoos.

Our Vision

The Vision of Wright-Way Consulting is to use our specialized knowledge in cost and management accounting in order to assist our clients in gaining a better understanding of the costs of their products or services; improve the efficiency of their costing and inventory control systems, all of which ultimately affect profitability.

Our Mission

Our mission at Wright-Way Consulting is to help our clients increase their revenue in the Okanagan through cost analysis, improved efficiency and better control of their inventory.

We constantly strive to understand our client’s situation and their needs in order for us to be as effective as possible.

The accuracy of our work and the attention to the small details will impact, in a positive way, the projects we are committed to working on with our clients.

With honesty and integrity we will share information; this commitment is the life line of the business.

Contact Info:

Tracy Wright, CMA
Tel: 250-470-8421
mailto: tracy@wrightwayconsulting.ca

Inventory Control - Kelowna

Inventory is money sitting on your shelves. Typically, inventory has a large dollar value. It exists so that you can give your customers the best service possible by having what you need when you need it. For these reasons, it is extremely important to keep track of the inventory you have on hand, plan for your future needs, and ensure that what you have on the shelves matches what is recorded in your inventory system.

• Inventory Tracking
• Inventory Planning
• Inventory Reconciliation

Contact Info:

Tracy Wright, CMA
Tel: 250-470-8421
mailto:tracy@wrightwayconsulting.ca

Project Costing - Kelowna

Whether you are starting a new business, opening a new location, or having a project come online, it is important, through both the planning and the implementation stages, to be aware of the material, labour, and overhead costs associated with your new venture in order to ensure its profitability.

• New Business Cost Accounting
• New Location Cost Accounting
• Other Project Costing

Contact Info:

Tracy Wright, CMA
Tel: 250-470-8421
mailto:tracy@wrightwayconsulting.ca

Analysis - Kelowna

Analysis is very likely required in many areas of your business. Whether you want to improve efficiencies, save on costs, understand variances, determine the most cost-effective approach, document a process, decide whether to outsource, or determine whether a product is profitable or not, all of these procedures necessitate analysis.

• Comparative Cost Analysis
• Variance Analysis
• Product Profitability Analysis
• Outsourcing Analysis
• Process Analysis
• Sales Rate and Volume Analysis
• Time and Motion Study
• Customer Profitability Analysis
• Cost-Volume-Profit Analysis

Contact Info:

Tracy Wright, CMA
Tel: 250-470-8421
mailto:tracy@wrightwayconsulting.ca

Cost Effectiveness - Kelowna

Do the benefits of providing a service or product outweigh the costs? How efficient is a particular process? Which is the most cost effective method of doing a job? In order to stay competitive and profitable in Kelowna, all of these questions need to be asked and answered in the every-day running of your business.

• Cost-Benefit Analysis
• Efficiency Analysis
• Cost-Effectiveness Analysis

Contact Info:

Tracy Wright, CMA
Tel: 250-470-8421
mailto:tracy@wrightwayconsulting.ca