To account for all expenses it incurs while making products for resale, a manufacturing company has a cost of goods manufactured account. The cost of goods manufactured includes three types of inventory: direct materials, work in process, and finished goods.
Your business makes the products it sells, you could benefit from a well-chosen accounting system. But manufacturing businesses have their own special accounting requirements – here's what you need to know.
Manufacturing isn't like other types of business. Retailers sell stock and service companies sell their time, but only manufacturers create new products from scratch.
This can lead to accounting problems. Manufacturing businesses have to account for their raw materials and processing costs, but they also have to work out the value of the finished items they create.
There are different methods of doing this. You'll need to choose the right one for your business and use it properly. In this guide we'll look at the methods available to you, and some potential problems and useful benefits once you’re up and running.
With this knowledge you'll be able to choose the right accounting system to help your manufacturing business grow.
Get the right accounting deal for your company
No manufacturing company is too small for you to properly track its accounts. Of course, you'll need the right accounting software. There are plenty of packages available, so don't just buy the first one you see. Manufacturing accounting software will probably stay with you for the life of your business, so choose it wisely:
Read forums, ask friends and colleagues, find out what other businesses like yours are using.
Choose accounting software that was created with input from manufacturers, so you know it'll handle your business needs.
You're starting small but you may not stay that way. Be sure to go for accounting software that will grow with you.
Cloud-based accounting software will let you access your accounts from anywhere and should cost you less up-front, as well as reducing your IT support costs