Q: What is cost accounting, and how does it apply to my business? Do I need to hire an accountant to do it for me?
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A: Cost accounting is the process of identifying and tallying the cost of producing a good, delivering a service, or, at a higher level, running part or all of your business. It can be invaluable in budgeting and pricing, and in identifying opportunities to reduce costs, launch new products or enter new markets. For a simple business with relatively few inputs, cost accounting can be a fairly straightforward affair. However, it can quickly become more complex for businesses offering multiple products and services from multiple locations, with plenty of room for distortions if simplistic approaches are used. Hence, there are multiple approaches to the exercise. Since cost accounting is used largely for internal decision-making, there’s typically no mandate to involve an accountant. But if you’re having trouble getting a handle on all of your costs or you can’t figure out how to apportion overhead expenses, an accountant or other financially savvy business consultant can help.