Finance 10 commandments article review

Essay by sseguchiUniversity, Bachelor's June 2005

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Article 2 review "The 10 commandments"

The 10 costing commandments that are needed to bring the financial department in line are:

1. Thou shalt close the books every 30 days whether you need to or not. Every 30 days the books should be looked at to determine if any changes can be made to help the business run more efficiently. Every month the books should be reviews to see if any changes can be made in operations, marketing, etc. Even though the business is successful management should be looking at the books every month to find ways to make it even more successful.

2. Thou shalt have only 3 cost elements - material, labor, and overhead. Material, labor and overhead needs to be examined thoroughly. In our times material and labor are getting cheaper and overhead is rising. We need to examine our businesses to find balance in these 3 elements.

3. Thou shalt place absorption of overhead before understanding overhead. Overheads should be analyzed and understood to enable accurate and effective absorption. Bad decisions will be made if overhead is not understood.

4. Thou shall be precise to the right of the decimal point and not relevant to the left. This just means that in a financial environment, if one number is wrong, everything I wrong. All numbers must be entered in carefully for financial statements to make sense and for companies to be able to use the data to improve. If even one number is off the decimal point may as well in be the wrong place.

5. Thou shalt place direct labor and factory costs before all others. I feel that this commandment no longer exists. In our new society most factories are trying to automate as much as possible. Automation is a smart thing...