Cost Allocation Software

Many organizations struggle to track and allocate (recurring) costs accurately. This leaves you in the dark on how much it costs to produce different products or services and/or the financial impact of different departments on your total costs.

With cost allocation software, you identify, aggregate, and assign different costs to different cost objects. This cost object can best be explained as a single activity or item for which you would want to measure the costs.

So what ‘counts’ as costs or cost objects? Well, that depends on a) the way your organization is structured and b) the goal of your endeavor with cost allocation software. They can be internal or external. Internal costs are usually listed as departments, units, or assembly lines. External costs are described as the organization’s product(s), service(s), or activities.

Corporate Allocations example

Complex sectors need professional cost models

Linking costs to their rightful source sounds like a simple process. And yes, it might very well be a simple portion of your administrative tasks when you offer a single product or service and are a small organization with very few departments and internal processes. However, as your organization grows, the complexity also increases. How do you allocate, for example, the cost of your software licenses or rent? This is where cost allocation software comes in. There can be several reasons why you would want to use cost allocation software, like providing accurate costs, gaining insight into resource usage, accurately determining or optimizing your pricing, or creating more transparency for stakeholders or external auditors.

Advantages of CostPerforms
cost allocation software

So, there are a myriad of purposes and reasons to use cost allocation software. With CostPerform, you can build the cost allocation software of your dreams. With this, you can:

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Create activity-based budgeting, forecasting, and simulations

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Using CostPerforms cost allocation software can lead to tremendous insights

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Create true cause-and-effect relationships between products and costs

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Understand and visualize the metrics that are important for your business

Different uses of cost allocation software

We can point out two main ‘uses’ of cost allocation software: to optimize profit and to optimize your internal processes. Optimizing profit is linked to financial accounting, while optimizing internal processes is linked to managerial accounting.

Cost allocation software for financial accounting

We can point out two main ‘uses’ of cost allocation software: to optimize profit and to optimize your internal processes. Optimizing profit is linked to financial accounting, while optimizing internal processes is linked to managerial accounting.

Cost allocation software for managerial accounting

Managerial accounting is less concerned with optimal allocation for optimal profit. Instead, it uses cost allocation software to determine areas of the organization that can be improved upon. By doing so, the (internal production) processes are made more efficient, which further optimizes your organization as a whole.

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