[ERP] Difference Analysis and Control of standard costs in ERP

[ERP] Difference Analysis and Control of standard costs in ERP

Currently, most mature ERP systems are integrated with standard cost management systems. Due to the high integration of the ERP system, the impact of various factors on the standard cost results requires a lot of time and energy for relevant personnel to analyze. After all, intelligent systems still require human participation. This article focuses on differences analysis and control.

I. Differences in standard costs types the sources of differences in standard costs mainly exist in three stages: procurement, storage and production. The difference in the procurement process is mainly caused by the mismatch between orders, invoices and receipt processes. In theory, the three elements should be consistent, but in fact, apart from the reasons for manual setup of the procurement price and standard cost, the differences caused by other reasons vary widely. To facilitate the control of the main factors, the price, invoice, standards and other differences almost become the standard settings. Theoretically, storage is static, but for various reasons, there is always a difference between physical objects and books. During the logistics process, any place where the materials are stored may be at risk of inconsistency. The actual materials and materials may be inconsistent during the production process due to various reasons, and the Labor and manufacturing costs may also be caused by the deviation between the standard rate and the actual rate. Ii. Differences Analysis and Control: only by fully grasping the source and cause of the differences can we fundamentally analyze the differences in costs and take effective measures to control the emergence of cost reduction exceptions, in order to maintain inventory and cost authenticity and rationality. The difference in the procurement process is always centered on the order, invoice, and receipt processes. For the differences in the procurement process, the procurement department should collect relevant information month by month and find the root cause of the problem to solve it. Tracking and control is implemented for all key activities in the procurement process to improve the accuracy and timeliness of information flows. For example, for the process of downloading and transferring procurement orders, the information of orders issued by purchasers and the information received by suppliers should be collected for analysis. Generally, order errors (quantity, unit price, unit, currency, etc.) are caused by weak control, or handling errors due to supplier negligence. At the same time, the wrong order information of the supplier may cause the corresponding invoice and shipment error. In fact, the negligence of the supplier's financial personnel, the delivery error, and the carelessness of the recipient all result in the difference. If the difference in procurement is traced back, all the above steps can be the root cause of the problem. Therefore, the corresponding control process must be clear and effective. With the cooperation of the Finance Department, the procurement department should assess the differences to orders, strengthen control over these control points, and increase the weight in the assessment indicators. Storage links are usually caused by differences in company management vulnerabilities, library management personnel omissions, material value reevaluation, and BOM issues. The material information recorded in the ERP system differs from the actual inventory information, which should be submitted to the responsible personnel in writing for report and approval, and the inventory should be adjusted accordingly. Due to the differences in material value re-evaluation, the post-first-in-first-out method is allocated between inventory costs and sales costs. BOM errors may cause inventory quantity and value errors. The manufacturer should review and control the BOM structure and version to avoid any discrepancies. The differences in the manufacturing process are usually caused by BOM errors, inventory, order errors, picking, and other exceptions and cost fluctuations. The company should analyze the reasons for the differences in production orders, and lead the production management personnel to organize relevant personnel to analyze the causes of the differences, identify the causes, and take measures. Iii. Conclusions and suggestions any abnormal upstream business may be caused by the high integration of the ERP system. The company should standardize various operational procedures, strengthen the quality control of system input information, and adopt the differential responsibility system, the responsible person is responsible for the difference, and gradually reduce the possibility of the difference from the source, this makes standard costs a powerful tool for enterprise management.